VW Group ponders a yard sale
Could coronavirus force VW to sell Lamborghini, Bentley and Bugatti? Georg Kacher investigates
Volkswagen Group is considering selling the crown jewels: Lamborghini, Bentley and Bugatti. Some or all of these brands could be on the block, along with Ducati motorcycles and the Italdesign consultancy, as the novel coronavirus pandemic triggers some novel thinking.
The five operations are collectively valued at circa €16bn, according to the Roland Berger business consultancy. But that’s theoretical, dependent on whether there’s a serious buyer, whether Volkswagen will truly sell, and whether any agreement can be hammered out.
The boutique car brands were acquired in a ’90s spending spree, when Ferdinand Piëch was chairman of VW’s managing board. He went on to chair VW’s supervisory board, but things have changed since the automotive legend’s grip loosened in 2015. (Piëch died last year.)
Ex-group finance guy Hans-Dieter Pötsch is now in charge of oversight, with Herbert Diess CEO of day-to-day operations. There’s been friction between the two camps, with Diess under fire for delays to the Mk8 Golf and ID.3’s introduction.
And in June, Diess had to issue an apology for accusing the supervisory board of leaking confidential info; he was swiftly stood down from running the VW brand to focus solely on the Group. A priority is to map out a clear future for the boutique brands.
‘Five years ago, money was no object and VW could easily afford a handful of hobby brands,’ says a former board member. ‘But since Audi lost its mojo and the diesel scandal devoured €30bn, all non-essential activities are currently subject to review.’ Over the past two decades, the VW Group has passed on plenty of parts and know-how to its luxury trio, but a grand divorce could be spurred by the pending transition to EVs. And how the luxury brands embrace pure electric is not yet signed off, although Bentley is adamant it will deliver its first EV in five or six years.
To put the potential €16bn disposal fee into context, that’s half the €31.3bn cost of the diesel emissions scandal and about a quarter of VW’s investment in electric vehicles and digitalisation.
In late 2018, Lamborghini was valued at €8bn by a consortium of Italian and Asian investors; one which subsequently pulled out because of uncertainties around the funding of the next-gen ⊲
sports cars and the Urus licensing agreement’s terms. Rumours in early 2019 suggested Investindustrial (which co-owns Aston Martin) had put out feelers on Lambo and Ducati. Around this time, Diess was asked under which conditions he might dispose of Lamborghini. ‘If a Chinese investor comes along with a bundle of cash, I would not rule out succumbing to persuasion,’ he replied frankly.
This spring, new suitors from the Arab and Asian spheres emerged. ‘This is not a good time to sell a car manufacturer, but it is a good time to buy,’ says a source in Italy. ‘As far as we understand, Lamborghini is currently worth around €6bn, give or take a little. Bentley has been provisionally pegged at €8bn, Bugatti and Ducati may fetch up to €1bn each, Italdesign would probably change hands at €200m.
‘But these numbers must be taken with a pinch of salt because they depend on the final agreement concerning long-term parts supply and shared capacity. From what I gather, the Group wants to honour these commitments only until Lambo’s current product portfolio expires.’
Volkswagen’s managing board has now signed off its plan for the next wave of Lambos. This includes an updated version of the V12 engine crucial for the Aventador, Lambo’s
own bespoke V8, and pooled supercar componentry.
Sant’Agata’s 2019 earnings pleased Diess, but the supervisory board reportedly wants to keep all options open as protection against further penalty payments and a prolonged downturn.
The other Italian outpost is Ducati. Diess is an avid rider, but knows two-wheelers are not core business (nor are trucks, which puts a question mark over ailing MAN). If a buyer can be found, freeing the Italian marques is a real option. A similar fate is on the cards for Bugatti, which requires a substantial influx of capital. Bentley, like Lamborghini, posted strong results before the pandemic struck. Demand was bullish, and the facelifted Bentayga (see p30) is coming. But coronavirus has blown a hole in the finances, triggering 1000 redundancies, and work on the next-generation products has only just begun.
A Bentley source vehemently denied the brand was for sale. ‘We have complete support from the VW board. Bentley is the world’s biggest luxury brand, and we’re in growth markets. Without Covid, Bentley would have delivered record sales and profits this year. We still will – just at a later date.’
Crucially, what do the owners – the Porsche and Piëch families, who control the Group with the state of Lower Saxony – think? Wolfgang Porsche has expressed his solidarity with Lamborghini, and spoken out against Bentley prior to its resurgence. Ducati does not really figure on the owners’ radar, and Italdesign is little more than a haven for special projects. And of course Bugatti’s champion – Ferdinand Piëch – is gone. But it’s dicult to fathom their intentions for each brand.
Regardless, Volkswagen Group needs an enormous war chest to fund the zero-emissions future across its 11 million annual sales. Diess was recruited to help cut costs, which will involve a ferociously expensive battle with powerful trade unions. And if the US courts do confirm more emissions-related penalty payments initiated by the states of Florida and Utah, VW could be on the hook for billions more in fines. It’s enough to make executives think the previously unthinkable.
Lamborghini is currently worth around €6bn, Bentley €8bn and Bugatti €1bn