Filed under: Sedans/Saloons, Sports/GTs, Supercars, Bugatti, Porsche, Volkswagen, Earnings/Financials
Porsche proposal busts Bugatti
That Porsche owns a significant stake in the Volkswagen group (and all its subsidiaries) is no secret. In fact, Porsche is even in the process of increasing its stake. Oddly, though, little seemed to be done to minimize the competition presented to Porsche products by those of VW divisions: Lamborghini Gallardo vs. Porsche 911 Turbo, Audi TT vs. Porsche Boxster and Cayman, Audi Q7 vs. Porsche Cayenne, etc. But now Porsche is reportedly taking aim at an easy target: Bugatti.
Truth be told, it's really Bugatti's lack of profitability that Porsche is targeting. Porsche remains one of the only sportscar manufacturers that generates profit (copious amounts of it, actually), while Bugatti loses VW money continuously. The development costs of the super-expensive Veyron were to be offset by the application of technology towards future Bugatti vehicles (like a new saloon or four-door coupe), but if Porsche gets its way, a new Bugatti will never see the light of day, with Stuttgart evidently preferring to cut their loses (and a competing supercar maker).
Volkswagen would be unlikely to find a buyer for Bugatti even if Porsche applied enough pressure for them to sell. Stuttgart's proposal, then, would be to turn the exclusive marque even more exclusive, as a coachbuilder, creating unique one-off vehicles (like Jim Glickenhaus' Ferrari P4/5 by Pininfarina) for over $4 million a piece. And here we thought the existing Veyron was expensive....
[Source: Car magazine via Motor Authority]
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Reader Comments (Page 1 of 1)
Saab analyst 3:18PM (11/24/2006)
What right should Bugatti have to spend all that money with profit nowhere to be seen.
Porsche's proposal to start selling cars with real price is totally reasonable.
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Tiago do Vale 3:51PM (11/24/2006)
I don't see any harm in having a little foresight: the money didn't go down the drain! It is a marvelous piece of marketing for the entire group and a great way to put the Bugatti name on the map again.
The development of an amazing (out of this world) engine and transmission costs money, of course, but they will not spend it again if they use it in new models, so, besides the great investment in marketing it was, it can even be profitable in the long turn.
You can't run Bugatti like you'd run a common marque... not even like Porsche.
But it's strange that Porsche is being too simplistic about that: they have some sense of strategy... There must be something we don't know.
Porsche could even benefit from some of Bugatti's techonology for sure (and vice-versa, why not).
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Deril 3:52PM (11/24/2006)
Yeah. Seems like Bugatti leaves much to be desired =)
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Lee Burton 3:56PM (11/24/2006)
Despite what anyone on here posts about how unprofitable Bugatti is, the Veyron is undoubtably the greatest super car to ever grace the presance of drivers today. Its takes money to build greatness. And that means an unimaginable debt that comes with it, so be it!
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Lee Gibson 4:08PM (11/24/2006)
"What right should Bugatti have to spend all that money with profit nowhere to be seen."
What right do you have to tell other people how to spend their money?
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sirAQUAMAN64 4:43PM (11/24/2006)
What does Porsche care if there's other sports cars out there, especially from VW AG? Porsche is getting already too popular IMO... not exclusive enough. They can't forever increase market share and sales without brand dilution. If they can share technology between themselves and VAG why not? I'm sure the Audi Q7 and Lambos generate revenue. The Bugatti is a relaunch of a new brand and phenominal product - it'll cost money, but with continuously available uber-premium products (which Porsche cannot claim anymore, even tho they have a huge core following) from Bugatti they can charge for it.
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tbyron 5:10PM (11/24/2006)
Which Porsche model does any Bugatti compete with anyway? The sold-out Carrera GT? The Cayman? The Cayenne? Bugatti is a financial drain on an unfocused VW. That is the ONLY reason Porsche should and probably is taking aim at the brand.
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Carlos 5:20PM (11/24/2006)
My question is why do any of you care that Porsche is going to wack Bugatti anyway? None of you can afford a Bugatti so why worry? As for Porsche doing it for profit, it makes sense, also I do have to agree that Porsche is beginning to lose some of it's identity by creating a lot of these low priced cars, but on the flip side, that means more Porsche fun for everyone.
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Howard Kerr 5:38PM (11/24/2006)
Somewhat ironically, Porsche WOULDN'T be profitable today if they hadn't called the Japanese in for some cost reduction help. I think it was in the late '80s Porsche was losing money on every car they sold and so Toyota, or experts using Toyota's "just in time" processes helped trim the overhead.
Just as GM never learned from it's experiences with it's NUMMI plant, VW will not learn, or does not want to learn from it's "little brother", how to build cars more profitably. VW today is somewhat like GM in that several different nameplates, under one structure, are competing with (duplicating?) each other. And in some cases, the cheaper brands inside VW Group build a product with better value...like Seat versus VW.
It remains to be seen whether Porsche's having a larger stake in VAG will be a good thing in the long run.
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Matt 5:54PM (11/24/2006)
I don't see why they don't just raise the price of the Veyron. It's the fastest street-legal car in the world, and if people are already shelling out the one and a half million, they will surely pay an additional million or two. Only those with THAT kind of disposable income would/could afford one to begin with.
$28,000/month payments for the lose?
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Tiago do Vale 6:11PM (11/24/2006)
#8 Carlos: I can't buy a Porsche (unless I'm stupid) so I rather have Porsche finished? What kind of logic is that?
We all need these ultimate pieces of art, even if we cannot afford them: they stir our imagination, and broadens our horizons.
I can't afford a Picasso, but he made me look differently at things...
Better still: I never went to the moon, so I don't care for NASA. But I use many techonologies created by NASA everyday... Maybe even right now, sending this comment.
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Richard Warren 6:16PM (11/24/2006)
Send Bugatti racing, problem solved.
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AMcA 3:04PM (11/25/2006)
I just hope that if they do the coachwork approach, they still do the superlight two place roadster rumored recently. I'd pay through the nose for a small, exquisitely finished lightweight Bugatti roadster. I'd do it in a heartbeat. And it's because of the awesome achievement of the EB110. They can't throw that away.
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Andy 4:35PM (11/25/2006)
VW/Audi doesn't need a new luxury brand. Audi serves that role well. At least Bugatti scored points with the Veyron. Maybach scored nothing.
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Muzza 5:23AM (11/26/2006)
This doesn't make sense. It was Ferdinand Piech who wanted to see VW buying the famed marque and it was he who told the world about the specs for the Veyron, his wife even owns one of the first 10 to be produced! I'm sure he would be reluctant to shut down what was his pet project, and as he is the second largest individual Porsche shareholder, his influence is considerable there as well as at VW.
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Grumpy John 3:26PM (11/27/2006)
Bugatti loses over three million dollars on every car they sell.
Maybe Ford will buy it.
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Johnny 9:30PM (11/27/2006)
Why would Porsche want to take aim at a classic marque anyway? Are they taking the cheap shot so the forthcoming GT1 can have less competition? In my opinion Bugatti shouldnt go down without a fight. #8 is right also, Porsche is building far too many cars, especially the 911. I see so many Porsches that they no longer catch my eye. Thats just me.
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David 2:21PM (2/13/2007)
#18; you see more and more Porsches in part because people take care of them, they seem to last a long time and as time goes on we have to see more and more of them unless the older ones are being destroyed. While I don't see a lot of Ferraris, I see a lot more now than I did in the 60's because they're are a lot more now. Besides, the issue should be the quality of the car not the rarity of it. Cars are rare because not many people buy them. They don't buy them because they're either very expensive or not very good.
As for those of you who think VW should build Bugattis because they're works of art, two thoughts; 1-VW exists to make a profit, not art. It's easy to say otherwise when they're not losing your money. But they are a publicly held company and they are losing someone's money; their shareholders. 2-Picasso lived into his 90's and died a rich man because he sold his work for more than it cost him to produce it. Even artists have to make a living.
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Yago Bal 2:00AM (3/23/2007)
1. Bugatti is a major marketing operation for the VAG Group, and that in itself is priceless. Just think of what it did for the VAG image, and how much would cost the same effect based only on publicity.
2. The 4.5 million people say it's the real price of the Veyron includes development costs: if the Bugatti range is expanded using the same already developed drivetrain (on a 4 doors car, for instance) they can make a profit easily. Putting up a brand from scratch costs money, and the profits will come in time: it's always like that.
3. Bugatti allowed the VAG group to develop top technology that otherwise would never be developed, and this knowledge will benefit all the group (and it's payed for).
So, as you see, theres a bit more about the "art" and "money" chit-chat. Bugatti may loose money on the Veyron and still be a very interesting (and in many ways lucrative) finacial asset for the group.
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