Volkswagen risks overreaching with exotic bikemaker Ducati

Frankfurt Ferdinand Piech, who has added six brands during his two-decade tenure leading Volkswagen, is about to add another with the purchase of Ducati Motor Holding. This time he risks overreaching.

The €860-million (Dh4,133 million) deal for the exotic Italian motorcycle maker raises the number of VW nameplates to 11 and stretches the automaker's product range from 195-horsepower two-wheelers to 50-tonne trucks. The addition of Ducati isn't likely to add much to the company's bottomline and may prove a distraction for Piech, who is already working on the integration of Porsche.

"The Ducati deal shows that Piech is an engineer and engineers are sometimes like little babies," said Ferdinand Dudenhoeffer, director of the Centre for Automotive Research at the University of Duisburg-Essen and one of the most influential observers of the German auto industry. "It's a new toy."

Folding in Ducati adds another project for VW management, which is already tasked with integrating Porsche's carmaking operations, fashioning a truck alliance with affiliates Scania and MAN and thwarting Suzuki Motor's efforts to force it to return a 19.9 per cent stake after their partnership failed. VW is aiming to overtake GM and fend off Toyota Motor to become the top global carmaker.

VW's diversification and accumulation of new brands counters the strategy at its biggest competitors.

Fiat last year spun off its Iveco truck operations into Fiat Industrial to push its integration with Chrysler Group. Ford Motor unloaded Volvo, Jaguar and Land Rover to become leaner. General Motors shuttered the Hummer, Pontiac and Saturn brands and sold Saab as part of its bankruptcy reorganisation.

"With heavy trucks, and now motorcycles, they may be coming to the limits of the types of products they understand with their car way of thinking," said Christoph Stuermer, an IHS Automotive analyst in Frankfurt. "With trucks, the inside — the layout of the motor and the transmission — matters but the packaging doesn't unlike cars."

Volkswagen has just raised its stake in Munich-based MAN, the maker of trucks and buses, to 73 per cent of the common shares from 56 per cent. The move is part of an effort to forge an alliance with Scania, which VW controls through a holding of 71 per cent of the Soedertaelje, Sweden-based company's voting rights. MAN and Scania follow Lamborghini, Bugatti and Bentley as brands added under Piech's reign, which dates back to 1993 when he became CEO.

‘Excellent fit'

The German automaker is exploring alternatives to integrate the Porsche brand after a merger with the Porsche SE holding company failed because of legal tangles. VW already owns 49.9 per cent of the maker of the 911 sports-car after Piech crossed his cousin Wolfgang Porsche to thwart Porsche's take-over of Volkswagen.

Ducati, which will be part of VW's Audi unit, last year sold about 42,000 motorcycles such as the $28,000 (Dh102,849) Superbike 1199 Panigale S Tricolore. The Bologna, Italy-based company's earnings before interest, taxes, depreciation and amortisation rose 39 per cent to €93 million in 2011, a person familiar with the figures said on March 13. Revenue rose 20 per cent to €480 million.

"We firmly believe that Audi and Ducati are an excellent fit," VW Chief Executive Martin Winterkorn said at the company's annual meeting in Hamburg.

Praise for CEO: ‘He thinks long term'

Few people deny Piech's contribution to Volkswagen. When he took over as CEO in 1993, the maker of the Golf hatchback was unprofitable, posting a loss of about €992 million.

Last year, the automaker reported a record profit of €15.4 billion. Over that period, the group's sales nearly tripled to 8.36 million vehicles from 2.96 million in 1993. Last year, the company surpassed Toyota to become the world's second-largest carmaker.

"He's done all the right things," said Juergen Meyer, a fund manager with SEB Asset Management in Frankfurt. "He thinks long term."