VW Sale Of Ducati Could Be Forerunner Of Truck Sale.
That Would Free Cash Upwards Of €23 billion.
“A deal would serve to increase conviction that VW will carve out its trucks business, a much larger piece of the pie”
Volkswagen is said to be about to sell its Ducati motorcycle subsidiary to Harley-Davidson, a relatively miniscule part of the VW empire, but investors are wondering if this could be the start of a major restructuring involving the selling of its hugely valuable truck assets.
VW’s truck business is said to be worth around €23 billion and would go a long way towards meeting the total damage done to the company from the dieselgate debacle. The profitability of trucks is far superior to autos, but investors reckon that disposing of it would not only bring in cash, but lead to a simplification of the business.
VW owns Scania and MAN and last year bought a 16.6 per cent stake in Navistar for $256 million, said to be designed to open up the U.S. for the European brands. Scania is, next to Paccar, the most profitable truck maker in the world.
Meanwhile, rumours about the sale of Ducati, said to have been bought on a €747 million whim in 2012 by former group chairman Ferdinand Piech, persist and the latest incantation reckons news will be announced in July.
Reuters news agency, in an unsourced report, said the deal could be worth up to €1.5 billion. Bajaj Auto of India is also said to be interested. BMW and Honda have eschewed interest, the report said.
Bernstein Research liked the idea of VW selling Ducati to Harley-Davidson, saying it made enormous strategic sense for the latter.
“With Ducati in play, Harley has the opportunity to buy the next generation of rides and skip the whole building part, as Ducati’s demographics skew far younger and more diverse than Harley’s,” Bernstein analyst David Beckel said.
Beckel said the deal would make sense for VW, but didn’t think this would infer a move to dispose of more assets like trucks.
“The sums involved won’t make much difference to VW, but a sale would be viewed positively by the market. But we’re dubious that selling Ducati really marks the start of a wider series of disposals or spin-offs,” Beckel said.
Investment adviser Evercore ISI quoted news agency Bloomberg as saying labour officials on VW’s supervisory board had declared against the sale of the “jewel” Ducati. But it liked the idea VW was up for selling more assets not regarded as core to the auto business.
“The sale of Ducati would be an indication that VW is serious in its intention to reduce the complexity of the business. A deal would serve to increase conviction that VW will carve out its trucks business, a much larger piece of the pie, and one for which the value unlock for shareholders will be significant – we estimate in the region of €23 billion,” Evercore ISI analyst Arndt Ellinghorst said.
“However, if the threat of the Workers Council is material, and it does manage to block the sale of such a small part of VW’s business, it would not bode well for the sale of any larger assets, like the truck business,” Ellinghorst said.
VW has allocated €22.6 billion to pay for fixing or buying back vehicles, fines and penalties arising from dieselgate. It could face further costs from law suits concerning its rigging of as many as 11 million diesels to cheat on emission tests.
The ratings agency Fitch raised VW’s credit rating to stable from negative, saying most of the operational and financial risks from the scandal are now know.