Volkswagen is said to be considering options for Lamborghini

Tuesday, 15 October 2019

Volkswagen is weighing options for its Lamborghini supercar brand as the German manufacturer moves ahead with an overhaul aimed at more than doubling its market value and getting ahead of an industry shakeout, according to people familiar with the matter.

The options VW is considering include a sale or stock listing, said the people, who asked not to be named, because the deliberations are confidential and no decisions have been made. VW has started preparations to fold Lamborghini into a separate legal entity and the process might conclude toward the end of next year, the people said.

Chief Executive Officer Herbert Diess wants to focus future expansion on the group's main global brands - VW, Porsche and Audi - in a push to channel resources more efficiently and avoid duplicated efforts. VW is drafting a revamp of its sprawling stable of 12 automotive brands, Sueddeutsche Zeitung reported over the weekend, citing an interview with Diess.

'We shouldn't spread ourselves too thin,' Diess told the newspaper. 'That might be hard in some cases, but it's the only viable way.'

The introduction of the Urus SUV has seen Lamborghini sales soar.

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Volkswagen signalled on Sunday that any decision on the Lamborghini brand is likely a ways off, saying it has no plans for a sale or IPO. A company representative had earlier declined to comment.

The German automaker's American depositary receipts climbed 4.8 per cent to US$17.68 in New York trading Friday.

Lamborghini's stretch from supercars to roomier sport utility vehicles probably has helped boost its valuation to about US$11 billion, making it a viable candidate for an initial public offering, analysts at Bloomberg Intelligence estimated in August. Sales of the Urus SUV have soared since its introduction in mid-2018. A redesigned Aventador and new hybrid supercar slated to hit the market next year may help boost margins beyond 30 per cent, BI's Michael Dean and Gillian Davis wrote in a report.

Investors have long urged Volkswagen, the world's biggest automaker, to free up assets whose value is subsumed within a cumbersome structure that includes a range from Italian supercars to motorcycles and heavy trucks. While Ferrari, once part of Fiat Chrysler, is now worth about US$30 billion, VW's key stakeholders have stood in the way of similar moves in Germany.

Diess, who took the helm in April 2018, has shown some success, completing an IPO of the Traton truck unit earlier this year. He has also started a review of units that make large diesel engines and transmissions, and has forged a broad alliance with Ford on commercial vehicles and electric-car and self-driving technology.

The 60-year-old CEO often emphasises the urgency of maximising VW's value as it contends with a costly technology transition, and recently key members of VW's founding Porsche-Piech clan have voiced support. He's targeting a market value for Volkswagen of 200 billion euros, the people said, from about 81 billion euros now. His efforts are aimed at helping VW defy the auto industry's current gloom and keep existing peers and future rivals from the technology industry at bay.

In intense debates earlier this year, VW's top management decided against pursuing the sale of units like Bugatti for now, partly because it was unclear if sub-scale assets could be divested without paying cash on top, according to one person. Still, smaller nameplates might face reshuffling going forward.