BOLOGNA - The worst may be over at Lamborghini SpA. After a year and a half on the job, Managing Director Vittorio Di Capua has stopped the losses and won approval for a new product range from the company's Indonesian and Malaysian owners.
Di Capua is also actively pursuing new shareholders and is working to improve customer relations. Next year Lamborghini will open a business center in its Sant'Agata Bolognese factory, offering a full restoration service for vintage Lamborghinis.
Di Capua was interviewed by Luca Ciferri during the Bologna auto show in early December.
Lamborghini was back in the black in the first half in terms of operating profits. What about the entire year?
We expect over L7 billion ($4 million) in operating profits on 1997 sales of about L70 billion ($40 million), so around 10 percent of sales. This is a big improvement for a company which closed 1997 with heavy losses.
How was the turnaround achieved?
When I took over in the summer of 1996 I started a massive cost-cutting program, both on the personnel and production side. We cut a number of high-ranking executives and top consultants. The total number was excessive for such a small company. In terms of efficiency, I claim a gain of 50 percent in productivity. One year ago Lamborghini had a break-even of 450 Diablos a year, despite competing in a market that, worldwide, doesn't absorb more than 1,200 units a year, priced over $200,000. We will close 1997 with a break-even - this time audited by Price Waterhouse - of 196 units. This year we will build 228-230 cars.
What is the productivity gain in terms of working hours per car?
We are down from 620 hours per Diablo to under 500. But this number doesn't signal the true gain in productivity, because Diablo production has a number of bottlenecks in the manufacturing process that were too expensive to change.
Lamborghini is looking for new investors. What is the progress?
This a very delicate subject, but I can say that by the end of January 1998 everything could be finalized.
It is rumored that these new investors are going to pay around $50 million for a minority stake in Automobili Lamborghini SpA and that their medium-term plan is to sell part of their shares in a public offering.
I won't comment. I can only add that the current shareholders, V' Power Corp. and Timor of Indonesia, which jointly control 60 percent of Lamborghini, and Micom of Malaysia, which owns the remaining 40 percent, will remain the controlling shareholders of Lamborghini.
Will fresh money from new investors cover the new-model investment plan?
No, it will cover almost half. The other half will mainly come from the improving cash flow. Do not forget that we predict - in the medium term - annual sales of around $200 million-$250 million, compared with $40 million of this year.
In addition, the merchandising and licensing side - which could generate $5 million-$6 million of royalties a year - had been historically neglected, despite the recognized value of the brand and image. We are working on this weakness to turn it into a strength. We will soon open an office in Milan to run the entire merchandising and licensing side in a truly profitable way.
Can you detail your future product plans?
We will invest around $100 million - $5 million dedicated to improvements for the current Diablo, including modifications for the 1998 model year and the GT2 version; around $30 million for the L147 program, which we call the Super Diablo; and the remaining $65 million to the L140 program, or Baby Diablo.
Super Diablo first: when, how, and how much?
The L147 will be unveiled in March 1999 at the Geneva show, going on sale in Europe immediately after and within 30-45 days in the USA. We plan around 400 units a year, priced at around $250,000. The car will feature many new things, including a further development of the engine, plus fly-by-wire accelerator, and shortly after the launch a sequential command for the new, Lamborghini-developed, six-speed gearbox.
Will the current Diablo survive after the arrival of the Super Diablo?
The final decision has not been made yet, but right now we think the market could absorb 100-120 stripped-down Diablo SVs for two to three years after the arrival of the Super Diablo.
What about the L140, or Baby Diablo? The project has been off and on for many years.
This time is the right time. Our time-to-market given to the L140 program is 26 months, so we plan to unveil the Baby Diablo in mid-2000, equipped with a new, Lamborghini-developed V-8 engine. We are budgeting 2,500 units a year to be sold at around $100,000.
In Turin there are rumors that Bertone will design, engineer and build the body of the L140, which will arrive in Sant'Agata fully painted and trimmed for the assembly of the complete running gear.
We are still having various discussion on the L140 manufacturing side, but Bertone remains the most likely candidate.
What about the LM-003/Borneo sport-utility project? Is it dead?
Not at all. The Borneo has become a project of Timor of Indonesia. Lamborghini was named chief of the project and we already have two engineers who are closely following the Borneo project in Jakarta. Most likely, there will be two versions: the Timor Borneo and the Lamborghini LM-003. The production of bodies will be done by Timor in Indonesia, which will also market 4,000 Borneos a year worldwide.
Lamborghini will receive in Sant'Agata around 1,000 bodies-in-white a year, to be trimmed as LM-003s and equipped with a Lamborghini engine, most likely our new V-8. The LM-003 could cost around $65,000.
Next year you are going to open a 'business center' in Sant'Agata. What is it?
It will be a diverse structure through which we hope to propose to potential and existing customers high quality technical assistance on their Lamborghinis, including sales, and eventually a line of merchandise.
It will be much more than just a sales center, because customers will have the opportunity to interact with Lamborghini and to experience a high level of personal attention and professional advice. This will not be in competition with our dealership network, but will enhance the product and image.
We are also experimenting with a new idea for commercial flexibility, whereby dealers are able to choose whether they act as a broker or operate a formal sales structure. This will improve our commercial efficiency and help the customer. The dealer network will receive a commission according to the sales origin. Certainly, this will represent an important cultural change, because we are in a world of dynamic partnerships that are at the base of strong commercial strategies.
A Lamborghini dealer gets an 18 percent margin on a Diablo. What will the dealer's commission be for a car sold at the business center to a customer he found?
We are thinking between 5 and 7 percent.
The business center will only sell and service new cars?
No, it will be for every Lamborghini owner. We are going to start a Renaissance Center for our mythical past models. In simple words, a customer can take his Miura to Sant'Agata, for example. We will give him a detailed quotation to fully restore the car to the original factory specifications.
At this point the customer can decide to restore the Miura or ask us to buy the car in its current condition. If he sells us the old car, the customer won't be obliged to buy a new one.