Lambo is a serious rival to Ferrari

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Hot Cars

January 4, 2007, 9:50AM EST

A Burst of Speed at Lamborghini

After years of restructuring the sports car maker is finally a serious rival to Ferrari

by Gail Edmondson

Business Week Online

Stanley Atkins left his Jefferson (Ga.) home last summer to buy a sports car, fully expecting to drive home in a Ferrari.

But the 55-year-old real estate investor felt snubbed by the Ferrari salesman, so he rolled down the road to rival Lamborghini--and never looked back. In fact, he was so smitten that he wound up buying two: a silver Gallardo Spyder convertible for $274,000 and, three weeks later, a $354,000 Murcielago roadster. "You go out in that car," Atkins says, "and people are all over you."

Lamborghini has long held mythic sway over car aficionados.

Its exotic flying-saucer design, its horsepower on steroids, and its deafening engines have been a powerful draw for fans such as comedian Jay Leno and actor Jamie Foxx.

But for years, Lamborghini suffered from financial woes and quality problems. The Italian super-sports-car maker went through six owners in 16 years and spent 1978-81 in bankruptcy. So for most of Lamborghini's 44-year history, it has been a mere speck in Ferrari's rearview mirror, selling just about 250 cars a year.

Now an infusion of German cash is helping Lamborghini burn rubber. In 1998, automaker Audi bought the company. After spending some $500 million revamping production and developing models, Lamborghini has the scale to mount a real challenge to Ferrari.

In 2006, Lamborghini says it sold more than 2,000 cars, and sales in the U.S. shot up 48% in the first 10 months alone. The company today has about 100 showrooms worldwide, up from only 45 in 1998. Ferrari still has roughly twice as many dealers, but in 2007 Lamborghini plans to add 10 more in such far-flung locales as Mumbai and Kiev.

Besieged with orders, Lamborghini's factory in Sant'Agata Bolognese, near Modena, is running full tilt, turning out 10 cars daily. That's brisk, considering it takes a worker an entire day just to cut and hand-stitch one leather seat. Still, it's not fast enough for all the Lamborghini lovers getting in line.

Both the 640 hp Murcielago and the 520 hp Gallardo have a one-year waiting list. "Lamborghini was always a hotter brand than Ferrari," says Garel Rhys, a professor of automotive economics at Cardiff University in Wales. "But it never translated into higher sales."

VERSACE INTERIORS

To preserve its super-luxury image, Lamborghini will take a page from Ferrari and pursue profits over growth.

In 2007, it expects to expand sales less than 10%. "We are a niche of a niche," says Chief Executive Stephan Winkelmann. "You can't increase volume at the snap of a finger." The former Fiat executive wants to boost earnings with limited-edition models packed with pricey options. One example: a run of 20 Murcielagos with interiors designed by fashion house Versace--and selling for $500,000.

Another untapped vein for Lamborghini is clothing and other gear emblazoned with its raging-bull logo.

Under Audi, Lamborghini at first concentrated on developing hot models and overhauling manufacturing. Now the company is starting to license merchandise, a business that generates some $200 million a year each for Ferrari and Porsche. A T-shirt with that half-million dollar car, perhaps?