More Talk of Volkswagen Unloading Ducati

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It seems to come in waves, every time the news cycle picks up Volkswagen’s plight in dealing with “Dieselgate” that talk then shifts to the German powerhouse unloading its smaller holdings, one of which being Ducati Motor Holding.

This latest go-around comes courtesy of Bloomberg, which has Volkswagen CEO Matthias Mueller saying that the automaker’s current portfolio of companies and its overall corporate plan will be re-evaluated over the coming weeks and months.

Tomorrow (Thursday), Volkswagen is slated to make public what this new business plan looks like, but sources say that VW will put all its assets under review, which includes Ducati.

Could this lead to Ducati being divested from Volkswagen’s holdings? The answer is of course murky, but we would be very surprised by the news.

Volkswagen has already done the hard work with Ducati, un-cooking the Italian motorcycle-maker’s books and streamlining its business operations.

For its efforts, Ducati contributed €702 million in revenue in 2015, with profits of €54 million (EBIT) – these numbers coming straight from Audi AG’s annual report for last year.

With Ducati already having to take the brunt of the R&D and expenditure for the move to Euro 4 emissions compliance, we can expect the Italian brand only to look stronger on paper going forward.

And, if there is one thing that Volkswagen needs right now, it is a cash-printing machine. Right now, Ducati seems to be carrying its weight within the German brand. That’s the good news, for Ducatisti.

However, one has to remember that the Volkswagen Group is a €213 billion company, which makes Ducati only 0.3% of the Volkswagen Group’s overall revenue structure.

That makes Ducati fairly superfluous in the grand scheme of things, which could easily drop the motorcycle brand outside of Herr Mueller’s “core brand” focus going forward.

In the end, the decision will likely come down to how badly Volkswagen perceives its need to reduce operations.

For Americans, the situation can draw parallels and resemblance to when the economic recession nearly put Harley-Davidson out of business.

As readers will remember, Harley-Davidson circled the wagons around its core business operations, and in the process divested MV Agusta and shut down Buell.

We doubt we’ll see the latter from Volkswagen, but the very real possibility is to see Ducati sold to another buyer. Audi AG, through its holdings in Lamborghini, bought Ducati for €747 million.

VW could feasibly get up to €1 billion now for Ducati, a modest sum to go against the €16.2 billion that VW plans to spend fixing the issues with its cheater-diesels (Volkswagen is setting aside roughly €18 billion for remedy, though).

The billion-dollar question then, is the potential sale of Ducati a meaningful contribution to that bill, especially considering the future profits that VW can expect from the Italian motorcycle brand? As always, time will tell.

Source: Bloomberg