The key players: A brand-by-brand breakdown of VW Group's most important marques
With the purchase of the Porsche brand in August 2012, Volkswagen Group added a 12th nameplate to its broad portfolio, which stretches from Ducati motorcycles via VW mass-market vehicles to 40-ton trucks. Here is a brand-by-brand breakdown of VW Group's most important marques.
Volkswagen Group's cash cow, Audi, aims to sell 2 million cars by 2020. While it benefits tremendously from the scale effects of its parent, Audi effectively cross subsidizes other operations within the company. Roughly three-quarters of the group's free cash flow comes from Audi while almost 9 out of every 10 euros in VW's 16.9 billion euro war chest is amassed in Ingolstadt. Operating profit slid 6 percent to 5.03 billion euros last year.
VW Group Chairman Ferdinand Piech initially acquired the automaker to get his hands on its more famous UK rival: Rolls-Royce. What he failed to recognize was that BMW had already secured the rights to the Rolls-Royce brand. The Continental GT remains Bentley’s best-selling vehicle while a crossover is due in 2016. Bentley improved its operating profit by more than half to about 168 million euros in 2013.
Bugatti, Lamborghini & Ducati
The exotic brands, which have been methodically acquired one after the other by Piech, are consolidated into larger units so few financial details are provided. Lamborghini boosted 2013 revenue 9 percent to 458 million euros. Ducati’s revenue more than tripled to 450 million euros last year, helping Audi’s motorcycle unit generate a 33 million euro operating profit after depreciation following the automaker’s purchase of the Italian firm.
The brand became part of VW Group’s empire after its parent, Porsche Holding Automobil, failed to gain full control over Volkswagen. The holding company’s debt-financed acquisition bid for VW Group crumbled, resulting in the sports car brand being sold to VW to finance a part of the company’s accrued liabilities. Fears that Porsche’s work force would be too proud to collaborate with VW engineers and managers have proved unfounded. Porsche made 2.58 billion euros in operating profit in 2013, its first full year of consolidation into the group.
A genuine success story since it was acquired in 1993. Today, some critics call Skoda the “better Volkswagen” because of the unpretentious simplicity of its design and VW technology under the hood, all matched with an affordable price. These strengths have made the Czech brand an internal threat to the higher positioned VW brand. Skoda aims to sell 1.5 million vehicles by 2018. Operating profit fell to 522 million euros last year from 712 million euros in 2012.
The Spanish subsidiary is one of VW Group’s few weak links. Multiple attempts have been made at successfully positioning Seat within the stable of eight car brands, all so far in vain. Largely dependent on its home market, the brand has often been seen as one failure away from being shut down. Industry watchers have speculated that Seat could be replaced by Alfa Romeo should Piech ever pry the underleveraged Italian icon from Fiat’s grasp. Seat, which hopes to sell 500,000 cars by 2018, had an operating loss of about 150 million euros last year.
The flagship marque is a dominant player in western Europe, China and Brazil, but it still heavily lags its competitors in the U.S., Russian and Indian markets. The introduction of the MQB architecture to underpin cars from Polo-sized subcompacts to the mid-sized Passat is a key part of its target to achieve a midterm operating margin of more than 6 percent. Operating profit fell to 2.89 billion euros last year from 3.64 billion euros in 2012.
VW commercial, MAN & Scania
MAN’s failed hostile takeover bid for VW’s Swedish ally, Scania, in 2006 prompted the German automaker to buy a stake in MAN. Volkswagen has steadily expanded its equity interest in both truckmakers and now has secured full control. Relations between the two truck rivals have often been icy, however, and VW has been unhappy with the progress in achieving meaningful synergies, repeatedly changing executives to send a message. Product cycles are typically twice as long in the truck industry, so it may take many years until VW can extract more value out of its purchases. VW Commercial Vehicles boosted its operating profit 6 percent last year to 448 million euros; Scania’s earnings grew 5 percent to 974 million euros; and MAN’s profit more than halved to 319 million euros despite selling almost twice as many trucks as Scania.