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

Wolfsburg, Germany

VOLKSWAGEN on Monday said it was giving up control of Bugatti, a storied automaker 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, will become part of a joint venture (JV) 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 JV, known as Bugatti-Rimac, and Porsche will own 45 per cent. Mate Rimac, the 33-year-old founder of Rimac, will be CEO. The companies did not disclose financial terms.

The deal undoes a major legacy of Ferdinand Piëch, 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 Piëch with questionable business logic.

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By his own account, Mr Piëch, 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. Those include shifting to production of electric vehicles (EVs) 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 football star Cristiano Ronaldo and entertainer Jay Leno, Bugatti chronically lost money.

"It's the only way to develop Bugatti for a profitable future," Lutz Meschke, chief financial officer of Porsche, said of the JV. 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 EVs but continue to sell cars with internal combustion engines for years to come.

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 60 mph 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 added.

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. NYTIMES