Volkswagen's Crown Jewels Are in Danger

Because of the bad PR? Or poor management? Or both?

In short, Dieselgate will likely leave Volkswagen with two options. Either close down/hibernate its ultra-luxury brands or sell them, with the second choice being preferable, if you ask me. In fact, as long as whomever buys them has the money to invest in their growth and is not some money-grubbing hedge fund, they would probably be better off without Volkswagen and its weird Group laws.

Could someone buy all of Volkswagen or are they too big?

With an $85 Billion liability hanging over their heads, who would want to?

Someone who is able to restructure to company. 

I guess to your point selling Porsche and Audi would have the same effect without the liability.

Don't forget Bugatti, Bentley, Lamborghini....

VW does own a lot of great brands. 

First I will say that what I am about to say is just my opinion and here goes:

Under almost no circumstance would VW Group sell its luxury and ultra luxury brands.

They might issue more stock, or take a loan from Daimler or the German government, but here's how the car industry works:

NO ONE in the car industry makes any money on cars below $40,000. 97% of the profits are made on luxury cars & SUV's for European Brands, and 103% of the profits are made on Pickup Trucks and SUV's for American Brands. American Brands actually LOOSE money selling Foci, Fiestas, Cruze,'s and other passenger cars.

Let's look at VW Group's sales by brand, and profit margin by brand:

VW Group sells about 10M cars a year.

5.9M of these cars worldwide are VW branded (aka low end and mainstream cars). This is 3% of their profits.

1.9M of these cars worldwide are Seat or Skoda branded and they are 1% of their profits.

1.8M of these cars worldwide are Audi brand. This is 40% of their profits.

300,000 of these cars worldwide are Porsche brand. This is 25% of their profits.

10,000 of these cars are Bugatti, Bentley, and Lamborghini. This is 28% of their profits, including the LOSS on every Bugatti they sell.

VW Group has over $400B in assets. 

So, if they have a lot of debt to pay off, the way to do it is to double down on their luxury cars and sacrifice R & D on their VW, Seat, and Skoda branded cars. VW, Seat, and Skoda more or less use trickle down parts from Audi's anyhow, so the best way to do this is to let a platform live longer, like making the MKIII Golf heavily related to the current MQB platform MKVII Golf. In fact VW has already stated this is exactly what they are doing.

Now, it could mean the death of diesel, and seeing VW Group double down on electric cars, hybrids, lithium air batteries, and charging infrastructure. And in ten years time, they could be Tesla's worst nightmare - which is be a profitable Tesla competitor with lots more scale than Tesla.

VW Group is already ahead of Tesla on self-driving car tech and, unlike Tesla and Google, VW respects people's privacy. Which rich people really value. If you don't believe me, ask how many of your rich friends have Android phones.

Those are my two cents.

Ajay, thank you for that perspective. What you say makes sense to me. 

Doubling down on luxury and cutting basic R&D makes sense to reduce debt.