Volkswagen sheds Bugatti, maker of over-the-top sports cars

Bugatti, whose Chiron model starts at close to US$3 million (S$4 million), will become part of a joint venture between Volkswagen's Porsche unit and Rimac. PHOTO: BUGATTI

NEW YORK (NYTIMES) - Volkswagen on Monday (July 5) said it was giving up control of Bugatti, a storied carmaker whose absurdly expensive hypercars are worshipped by aficionados but seemed incongruous at a company better known for economical Golfs and Passats.

Bugatti, whose Chiron model starts at close to US$3 million (S$4 million), will become part of a joint venture between Volkswagen's Porsche unit and Rimac, a young Croatian company that has made a name for itself doing design and engineering projects for large carmakers.

Rimac will own 55 per cent of the joint venture, known as Bugatti-Rimac, and Porsche will own 45 per cent. Mr Mate Rimac, the 33-year-old founder of Rimac, will be chief executive. The companies did not disclose financial terms.

The deal undoes a major legacy of Mr Ferdinand Piech, who dominated Volkswagen for two decades and built the company into a global empire. Volkswagen's purchase of Bugatti out of bankruptcy in 1998, long before it owned Porsche, was widely seen as an indulgence by Mr Piech, with questionable business logic. By his own account, Mr Piech, then-CEO of Volkswagen, got the idea after one of his sons admired a model of a vintage Bugatti in a souvenir shop while the family was vacationing in Spain.

Porsche CEO Oliver Blume acknowledged on Monday that the deal removes a distraction for Volkswagen and allows the company to focus on more important tasks. These include shifting to production of electric vehicles and overcoming the effects of an emissions scandal.

Despite price tags that can top US$10 million for limited-edition models and despite celebrity owners such as Portuguese soccer star Cristiano Ronaldo and entertainer Jay Leno, Bugatti chronically lost money.

"It's the only way to develop Bugatti for a profitable future," said Porsche chief financial officer Lutz Meschke, of the joint venture.

But the venture allows Porsche to keep its hand in the business and benefit from technological innovations, Mr Blume said.

Porsche is itself a storied sports car brand, but many of its models sell for less than US$100,000 and it has been a steady moneymaker for Volkswagen.

Mr Rimac said Bugatti will begin shifting to electric vehicles but continue to sell cars with internal combustion engines for years to come. Bugatti's current flagship is the Chiron, which is equipped with a 16-cylinder, 1,500-horsepower petrol engine and has a top speed of 300mph.

Mr Rimac founded the company that bears his name in 2009 with the idea of building a sports car, he said on Monday. The firm became a supplier of technology to bigger carmakers in order to survive. Porsche is also a shareholder in Rimac, as is Hyundai.

So far, Rimac has sold only a few prototypes, but is preparing to begin selling the Nevera, an electric sports car that will be able to go from zero to 60mph in less than two seconds.

Future Bugattis will be completely different vehicles from the Nevera, Mr Rimac said, with more emphasis on features such as the sumptuous leather interiors for which Bugattis are known. "We haven't figured everything out ourselves," he said.

Bugatti has a long history of losing money. The company was founded early in the 20th century by Ettore Bugatti, who studied art and taught himself auto engineering.

One of the company's most famous cars was the Bugatti Type 41 Royale. First sold in 1926, it was powered by a modified aircraft engine and had a top speed of 100mph - unheard of at the time. But only a few were built and they were not profitable, a chronic problem for the company.

Bugatti went out of business a few years after Mr Bugatti died in 1947. There were short-lived attempts to revive production in the decades to follow, but Bugatti was little more than a brand name when Volkswagen bought it.

Bugatti-Rimac will be based in Zagreb, Croatia, but retain a presence in Molsheim in France's Alsace region, where Ettore Bugatti's former villa and estate serves as a company showcase and workshop.

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