VW's emissions scandal puts a possible sale sign on Ducati

DEC 07, 2015 - The emission scandal which continues to haunt an automotive conglomerate may leave Ducati riding down a familiar, if not lonely road.

Over the weekend, financial news sites reported the Volkswagen group would be willing to sell not only the Italian motorcycle manufacturer but other select subsidiaries if they couldn’t find the cash to pay off a proposed $21.1 billion credit line loan being negotiated with banks.

There even rumors that these same subsidiaries could be sold ahead of any financing to strengthen the company’s finances.

The reason for not only the loan but also a need for the parent company, Volkswagen AG, to have increased liquidity or cash on hand, is in anticipation of massive fines, lawsuits and vehicle refits after it admitted to cheating U.S. diesel emissions tests and falsifying carbon dioxide emissions.

The supervisory board of Volkswagen AG will meet Monday, December 7th at the carmaker’s headquarters in Wolfsburg with some executives stating “further measures and consequences” could be decided. Reportedly on the table is “potentially monetizing some non-core assets,” according to Jose Asumendi, a London-based analyst with JPMorgan Chase & Co., who wrote to investors after a briefing from Volkswagen AG’s Chief Financial Officer Frank Witter.

However, Ducati fans should note, the company declined to comment as of Friday on what it might cut and there are no current concrete plans to sell assets.

Volkswagen AG has spent years acquiring familiar and in some cases, prestigious manufacturers. Bentley, Bugatti, Lamborghini, Audi, Porsche, SEAT, Škoda and Volkswagen are its automotive marques. Obviously it sells motorcycles under the Ducati brand and commercial vehicles under the MAN, Scania, Neoplan and Volkswagen Commercial Vehicles marques.

The company bought Ducati in 2012 with many viewing the purchase more about fulfilling a dream of then Volkswagen Group (VAG) chairman Ferdinand Piëch than for any great financial advantage. Piëch often spoke of regret at not snapping up the Italian factory when it was put up for sale by the Italian government in 1984. Instead, it was bought and saved from extinction by the Castiglioni brothers, founders of Cagiva.

At the time of the purchase, analysts doubted a tiny motorcycle maker would have a meaningful effect on a company the size of Volkswagen, commenting the acquisition had "a trophy feel to it," and, "is driven by VW's passion for nameplates rather than industrial or financial logic". With Ferdinand Piëch no longer at the company and Ducati being Volkswagen AG's only motorcycle manufacturer, many financial types mention the brand as first and foremost if the route of selling assets to raise needed cash is taken.

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Ducati's 2016 XDiavel promises a great year for the Italian Motorcycle manufacturer
Source Ducato Motor Holdings

As mentioned in the introduction, this isn’t an unfamiliar road for the famous Italian motorcycle manufacturer. Ducati has been owned by eight different groups and companies since founded by the Ducati family in 1926.

What other brands are being whispered alongside Ducati in these financial considerations? It has been reported Volkswagen had to confirm it's prepared to sell off some of its smaller holdings including Bentley and Lamborghini while negotiating the one year credit facility. Financial news sites have also mentioned MAN, a supplier of ship engines, generators and heavy-duty industrial components as a likely brand if the company were looking for cash.

Fans of Ducati and even the motorcycle world can only wait for not only the next move by Volkswagen AG’s supervisory board but also how the scandal emissions plays out over the next year and of course the final costs.

The only thing that is certain, this story has some miles ahead of it.

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