There’s a Big Problem Selling Ducati -- German Workers

  • Unions, family owners are resisting sale of motorcycle unit
  • First round of binding offers could conclude by late September

Volkswagen AG is facing stiffening internal resistance to the sale of its Ducati motorcycle unit, threatening to derail the deal even as the process moves forward with a short list of five bidders set to submit binding offers by the end of September, according to people familiar with the matter.

Persistent opposition from VW’s powerful labor unions and doubts within the carmaker’s Porsche and Piech owner families about the disposal will test management’s resolve to selling a non-core asset to reduce corporate complexity, said the people, who asked not to be identified as the talks are confidential. Executives involved have been puzzled by mixed signals, since the Audi unit, which owns Ducati, only started exploring a deal after parent company leaders urged the division to do so, the people said.

Spokesmen for Volkswagen, Audi and the families’ holding company declined to comment. A spokesman for VW’s works council said labor leaders continue to oppose asset sales in general. Employee representatives comprise half of Volkswagen’s 20-member supervisory board and can veto strategic decisions. The Porsche and Piech billionaire clan has four board seats. Initial offers valued Ducati at as much as 1.5 billion euros ($1.8 billion).

Among the handful of bidders left are the Benetton family’s holding company Edizione Srl and former owner Investindustrial SpA, the people said. A representative for Edizione declined to comment, while a spokesman for Investindustrial wasn’t immediately available for comment.

‘Too Big’

Retaining a business that has hardly any overlap with other parts of VW’s sprawling automotive holdings would raise questions about the asset review that’s part of a strategy revamp through 2025. Failure of the deal after months of work would be a fresh blow to Audi, VW’s largest profit contributor, which faces a management overhaul and a push to slash 10 billion euros in costs.

“This blocking attitude of even relatively small strategic decisions is another reminder of the balance of powers at Europe’s largest company and employer,” said Arndt Ellinghorst, a London-based analyst at Evercore ISI. “We remain firmly convinced that VW is too big to be effectively managed.”

A decade of empire-building under former Chief Executive Officer Martin Winterkorn and former Chairman Ferdinand Piech has left Volkswagen with a sprawling operation that current CEO Matthias Mueller is seeking to streamline. The Wolfsburg, Germany-based automaker can ill-afford to maintain complex structures amid a tectonic industry shift toward self-driving electric cars.

VW’s aggressive expansion since 2007 included the acquisition of Ducati for 860 million euros in 2012 and the addition of heavy-truck producers Scania and MAN, which also brought in divisions that make power plants and ship engines. The growth push roughly doubled VW’s operations to 120 factories across the globe. The industrial giant, now the world’s biggest carmaker, employs 627,000 people, almost twice as many as second-ranked Toyota Motor Corp.

Deal’s Significance

VW isn’t under pressure financially to sell Ducati, as its cash pile provides sufficient cover for money outflows related to the carmaker’s two-year-old diesel scandal. Still, a disposal would show the company is prepared to push through changes and could herald more complex deals.

Trying to downsize Volkswagen against the wishes of its unions has proved risky in the past. Wolfgang Bernhard, the former head of the VW car brand, was forced out in 2006 after clashing with labor leaders over a planned sale of the company’s large components-manufacturing operations.

Watch Next: How Ducati Plans to Get More People to Ride Motorcycles

— With assistance by Sarah Syed, and Daniele Lepido

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