Volkswagen Won't Sell Assets to Cough Up Dieselgate Capital, Blames Union Leaders

Financial analysts and industry experts have been expecting Volkswagen to begin selling assets to help cope with the cost of its diesel emissions cheating scandal. The penalty for its deception may have already reached $24.2 billion, and German lawsuits could tack on another $8 billion.

However, Europe’s largest automaker says it’s not interested in selling off properties to recoup losses associated with the scandal. It has another plan to rake in the cash.

VW says it’s more interested in focusing on the shift into electrification and mobility services. Cutting up assets for sale is not a good long-term plan for the company, according to corporate strategy head Thomas Sedran. While that may not be his personal assertion, it is a contention among the board members who forced the decision. Sedran said labor unions don’t want properties moved around, citing the group’s strong overall financial performance in spite of the scandal.

They may have a point.

Even Ducati, which is owned by Automobili Lamborghini S.p.A. and subsequently Volkswagen AG, has grown quite a bit since it was acquired by the company in 2012. Ducati has expanded from 1,197 employees to 1,558 and has remained profitable through last year. With the notable exception of Škoda, that’s been the case with of most of VW’s subsidiaries.

While the Italian motorcycle company seems like a good property to shift, mainly because so much of its current value is wrapped up in the Ducati name and there is so little product overlap, it still cleared $863 million in revenue last year. That represents a 4.1-percent increase over 2015 and $54 million in profits. It isn’t losing Volkswagen any money.

In fact, the thing hurting the company most is Volkswagen itself — especially its diesel division. Distancing itself from highly regulated internal combustion engines may be enough for it to turn a corner and keep from upsetting the unions.

“It’s much more important to discuss which new business fields the company will enter. Divestments are less relevant,” he said in an interview with Reuters. “Big decisions like how to expand or optimize the business portfolio of a global company need time and have to be developed by consensus. For Volkswagen, the topic of the business portfolio is very important but not time critical.”

Volkswagen is still considering the potential value of selling Ducati and transmission manufacturer Renk, though. Sources reference five bidders in the running to acquire Ducati, including Italy’s Benetton family, which owns a number of Italian roadside restaurants and a significant portion of the Autostrade they occupy. Offers on Ducati range from $1.5 to $1.8 billion.

“Top management has a clear idea of what belongs to core business and what doesn’t,” Sedran explained. “It is now a question of how the supervisory board will assess this and what one wants to do.”

The corporate strategy head didn’t say it, but it sounds like executives want non-essential subsidiaries gone while labor leaders, which are also on the board, prefer for them to stay. But Sedran stated the obvious by adding the money to pay for the emissions scandal has to be found somewhere.

“So it’s perfectly plausible that we consider whether the time may have come to find a more suitable owner for certain business areas,” he said.