For Negotiations to Buy Ferrari

IT IS FAIRLY well known that in 1963 Ford Motor Co. set out to buy Ferrari. Until now, however, the details of the story, and even official confirmation of the negotiations, have remained obscure. Here's the story of what happened.

In January 1963, Henry Ford II and Lee Iacocca came up with the idea of buying the Ferrari company. What they had in mind,- mainly, was to get into international racing especially the GT variety. They reasoned rightly that if they wanted a quick start it, meant buying brains, experience and facilities. And the best example of all these was Ferrari.

About the same time, word somehow got to Ford of Germany that Ferrari was interested in a merger with Ford. Probably it was one of those periods when Ferrari was short of money. But the important fact is that both parties were interested-and apparently independently so.

In April the Ford people made up their minds. Phil Paradise, head of Ford Italiano, was chosen to make the advance. He did this in May, approaching Mr. Ferrari with the idea of forming two companies out of a merger: FORD-FERRARI: With Ford as the majority stockholder, this company would build and sell the kind of luxurious sports and GT cars Ferrari was already building. FERRARI-FORD: The racing company. Ferrari would be the majority stockholder and basically in control but Ford would want to make use of publicity and engineering developments from the racing activities. Also, Ford wanted the option to purchase Ferrari's equity in this company upon the Commendatore's death.

This arrangement seemed essentially satisfactory to both sides, so Ford sent over Donald Frey, Ford Division's general manager, with a team that included an assets determination specialist, a manufacturing expert and two lawyers to begin the official negotiations. The talks began in mid-May.

Frey says that Mr. Ferrari was sincerely interested in making the deal. Frey stayed in Modena, driving out to Maranello each day to work on details with Ferrari. Ferrari himself rarely arrived before 10 am and it was usually after lunch before anything was accomplished. Enzo Ferrari is one of those night people, with a late metabolism cycle. Thus work often continued until late at night.

There was Iittle difficulty in agreeing on terms for the Ford-Ferrari part of the deal. Though Ferrari takes great pride in his passenger cars, he has always been closer to his racing. He demonstrated this by being relatively amenable about the passenger car business while having great reservations about the arrangements for the racing organization.

The negotiations got as far as even discussing the emblems to be used on the various cars. Ferrari would sketch out possibilities, with combinations of crests and prancing horses and/or the two names on them. Ferrari placed a figure of $16 million on what Ford would purchase, and at the time negotiations ended, the Ford group had arrived at a figure of $10 million. But there was room for bargaining on both sides.

Frey discussed details of possible racing activities with Ferrari. They talked at length about Indianapolis, and Ferrari surprised Frey somewhat by showing a lot of interest in the Indianapolis 500-mi race and even having a couple of engines he had designed with that race in mind. But when the talk got down to brass tacks about the racing company - who ran what, who got the publicity and so on, Ferrari began to have doubts about the whole thing. For one thing, he wanted Ford to sever its relations with Shelby American. Ford, on the other hand, felt an obligation to Shelby and this upset Ferrari. He felt, understandably, that there would be a serious conflict here. Another question from Ford, "What if we wanted to campaign GT cars at LeMans, promoted by Ford?" brought a significant pause.

Ford's lack of interest in Formula 1 was also off-putting to Ferrari. This was during the time of the 1.5-liter formula, remember. Perhaps if the negotiations had taken place later when the 3-liter formula was looming ahead-this might not have been a problem.

Why was Ferrari interested in merging with Ford? Frey says that Ferrari admired the elder Henry Ford greatly as a person and respected Ford as a company. He envisioned a happy combination of the large, reputable mass-market car builder combined with his own small-volume artistic approach. He was not interested, definitely, in adapting-mass production methods to his passenger cars.

Don Frey recalls some amusing incidents during the ten days he spent in Italy at that time. One evening after a very late-starting day, dinner with Ferrari lasted until 1: 00 AM. And for a Ford executive whose regular business day starts around 9:00 AM and winds up about 6:30 PM, this was going a bit far.

On another day, Ferrari drove Frey in one of his-latest production models to a favorite inn up in the mountains near Maranello - Gatto Verde, the Green Cat and on the way back gave a demonstration of the driving verve for which he's well known. He managed to hang the passenger's side out over the edges of the cliffs and to get Frey's side close enough to the solid walls that Don was more than a little impressed. But Frey was determined to be stoic and rode it out without a word. Frey also adds that Ferrari's driving was flawless.

Frey was impressed with Ferrari's warmth and volatility; Often described as tyrannical and unapproachable, Ferrari insisted throughout the talks that his loyal employees must be taken care of and was explicit in his proposed arrangements for members of his family.

The talks ended abruptly on Saturday morning after ten days of negotiations. Frey received a phone call from one of Ferrari's lawyers, informing him that there would be no further discussion and that there would be no deal. Disappointed but not really surprised, considering the difficulties the talks had brought to light, Frey and his team packed up.

In June of the same year, Frey journeyed to England where he made the arrangements with John Wyer and Eric Broadley that led to the formation of Ford Advanced Vehicles and subsequently the racing effort that finally led to victory at Le Mans.

That's how it all began.