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13 October 2019
INVESTMENT

VW weighs options for its Lamborghini brand in overhaul

Volkswagen has started preparations to fold Lamborghini into a separate legal entity and the process might conclude toward the end of next year.

LAMBORGHINI AVENTADOR/BLOOMBERG


Volkswagen (VW) 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 expected industry shakeout, reported Bloomberg.

The options VW is considering include a sale or stock listing. Chief Executive Officer Herbert Diess plans 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.

Lamborghini’s stretch from supercars to roomier sport utility vehicles probably has helped boost its valuation to around $11 billion, making it a viable candidate for an initial public offering.

Additionally, 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.

Investors have long urged Volkswagen, the world’s biggest automaker, to free up assets whose value is subsumed within a cumbersome structure that includes everything from Italian supercars to motorcycles and heavy trucks.

While Ferrari, once part of Fiat Chrysler, is now worth about $30 billion, VW’s powerful labour unions 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 and has gained backing for the planned sales of units that make large diesel engines and transmissions.

The Chief Executive has also forged a broad alliance with Ford Motor 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.

Diess is targeting a market value for Volkswagen of EUR 200 billion ($220 billion), from about EUR 81 billion now, in an effort to help VW defy the auto industry’s current gloom and keep both existing peers and new 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

 

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