Would you pay a billion smackers for Bugatti?

Bugatti's Chief Sees VW Gain
If the Unit Were to Be Sold Off

By DAVID PEARSON
March 8, 2006

Volkswagen AG would make a tidy profit if it were to sell off its Bugatti unit, builder of the €1 million ($1.2 million) Veyron supercar, says Bugatti's president.

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Those costs are a closely guarded secret but most auto-industry analysts reckon they are at least €500 million, and possibly more than €1 billion. Mr. Bscher said only that the figure is probably less than DaimlerChrysler AG invested in developing the SLR Mclaren, its top-of-the-line sports car and less than Rolls-Royce spends on a new model.

"I'm sure VW's shareholders would freak out if they ever find out" what the actual amount is, said Dresdner Kleinwort Wasserstein automotive analyst Christoph Dolleschal.

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Bugatti hasn't started delivering its two-ton ultimate driving machines due to delays in obtaining certification from U.S. authorities.

Mr. Bscher said complying with ever-tightening pollution and safety norms in the U.S. and Europe is a major headache and added that the company had to destroy one of the €1 million cars in a crash test. Even the world's most exclusive vehicle has to comply with the same standards as a VW Polo or Golf.

Bugatti will only make about 300 Veyrons. Initially it planned to build 50 a year over six years, but Mr. Bscher said the company may step up production to 75 a year by adding an extra shift at its site at Molsheim in eastern France and reducing the production run to four years.

Mr. Bscher was coy about what plans Bugatti has after that. There has been talk that it might make a larger, four-door superluxury car using the same engine and gearbox from the Veyron to keep costs down, but Mr. Bscher said nothing has been decided.

Mr. Bscher, a former racing driver, readily admitted that the Veyron isn't profitable. He said the point isn't to make money but rather "to show that it can be done." He said one of the main reasons Honda Motor Co. of Japan competes in Formula One racing isn't for the advertising that it can derive but because it motivates its engineers.

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The VW engineers who worked on the Veyron project must have thought they'd gone to heaven, said Mr. Dolleschal. "There was no budget limit. Everything had to be the best."

They ended up with a vehicle whose brakes cost more than many cars but the project hasn't been a smooth drive from the starting line. The Veyron was beset with mechanical problems before the engineers reworked the design in 2004.

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Bugatti has booked 75 orders so far and customers who order now will have to wait more than a year before taking delivery. That's dissuading potential buyers from the Middle East who aren't used to standing in line for so long.

"All of our clients, even if they were the president of the United States, have to wait for a year," added Mr. Bscher.

Multimillionaires who show up in Molsheim and expect to buy one are likely to be disappointed, as the company gives priority to customers who are either car collectors or have some close association with automobiles.

Bugatti won't disclose customers' identities, but Mr. Bscher denied a rumor that English soccer star David Beckham has ordered one. And he indicates that Bugatti isn't particularly keen to have Mr. Beckham join the exclusive club of Veyron owners, saying: "He's not a car person."