Volkswagen Faces €120 Billion Restructuring Cost

Author｜Wang Lei

Editor｜Qin Zhangyong

Even the “crown jewel of supercars” couldn't escape being sold off.

Yesterday, Porsche officially announced that the sale of its entire stake in Bugatti Rimac had been approved by regulators, with the transaction fully completed at a price of approximately €1 billion (around RMB 7.8 billion).

Yes, you read that right—the brand being sold is none other than supercar giant Bugatti.

This also marks the first time since Volkswagen acquired Bugatti in 1998 that the automotive conglomerate has fully divested its ownership of this top-tier supercar brand.

Moreover, the €7.8 billion price tag is a “package deal,” as Porsche is not only selling Bugatti but also its entire stake in Rimac Group—another Croatian electric supercar giant.

Even more intriguing is how the proceeds will be used: out of the €1 billion, €250 million (RMB 1.95 billion) has been set aside to fulfill pension obligations. In other words, the money from selling supercars will first go toward supporting employee pensions.

This dual divestiture of stakes in two top-tier supercar companies can perhaps be explained within the broader context of Volkswagen Group's massive restructuring.

Its parent company, Volkswagen, is undergoing its largest-ever restructuring plan, involving large-scale layoffs, factory closures, and sales. Recently, Reuters revealed the cost of this restructuring: a staggering €16 billion (approximately RMB 125 billion).

Under such extreme “downsizing” by the parent company, even an industrial jewel like Bugatti could not escape being liquidated.

01 Nearly 30 Years of Assets

Bugatti's significance in the automotive industry needs no introduction. Founded in 1909 by Italian-French designer Ettore Bugatti, the brand holds a near-mythical status in automotive history.

Volkswagen's relationship with Bugatti began in 1998 when Ferdinand Piëch, then CEO of Volkswagen Group, acquired the rights to the Bugatti name.

This iron-fisted CEO didn't just add another name to the group's luxury brand portfolio. That same year, he led Volkswagen's acquisitions of Bugatti, Lamborghini, and Bentley. Bugatti was Piëch's most aggressive project, intended to showcase the group's engineering prowess.

In 2005, the Bugatti Veyron became the first production car to break the 1,000-horsepower barrier with 1,001 hp, reaching a top speed of 407 km/h. This mythical achievement led Bugatti to state after Piëch's passing in 2019: “Without Piëch, there would be no Bugatti today.”

However, during times of ample financial resources at Volkswagen Group, this high-investment, low-output model served as an excellent brand-building exercise. But when overall corporate profit margins were significantly compressed, maintaining Bugatti's operations became a heavy financial burden.

This led to Volkswagen Group, through Porsche, transferring Bugatti into a joint venture with Rimac in 2021 to alleviate financial pressure. Volkswagen and Croatian automaker Rimac established Bugatti Rimac, attempting to leverage Rimac's electric technology to find a new path for Bugatti.

At the time, Rimac Group held a 55% stake, while Porsche held 45%. However, Porsche also owned approximately 20.6% of Rimac Group, giving it effective control over Bugatti with a combined actual ownership exceeding 55%.

No one anticipated that five years later, Porsche itself would struggle to hold on. Now, Porsche is offloading these stakes in a package deal.

02 Selling Supercars to Fund Pensions

As early as five months ago, Porsche had already hinted at selling its entire stake in Bugatti Rimac and its holdings in partner Rimac Group.

Earlier this year, Porsche's short-lived CEO, Michael Macht, explicitly stated in a public announcement about the Bugatti sale that Porsche's historical mission with Bugatti had been accomplished. It was now time to recoup scarce capital to support the continuous optimization of internal combustion and hybrid technologies.

At the time, the deal was still pending regulatory approval. Now, with the transaction completed, Porsche will fully exit its equity positions, completely divesting from all Bugatti-related businesses.

Currently, Bugatti is advancing the launch of its next-generation model, the Tourbillon, which will replace the Chiron. This model has explicitly abandoned Porsche Group's powertrain in favor of a V16 naturally aspirated engine and hybrid system independently developed by British engineering firm Cosworth.

Even the use of proceeds after the sale has been partially planned by Porsche. Out of the €1 billion, €250 million has been set aside for pension obligations.

With the transaction finalized, the mysterious “bottom-fishing” buyer has officially emerged—not a traditional automaker but two deeply backed investment firms.

The lead buyer is HOF Capital, a New York-based venture capital fund that rose rapidly by early bets on tech unicorns like SpaceX, OpenAI, and Anthropic, earning it the reputation of a “silent winner in Silicon Valley VC circles.” Despite managing over €10 billion in assets, it had never been involved in the automotive sector.

The true “financial backer” behind HOF Capital is Abu Dhabi-based investment firm BlueFive Capital, which contributed the largest share of funding in this transaction and currently manages over €15 billion in assets.

Bringing a top-tier supercar brand under the umbrella of Middle Eastern luxury capital seems almost inevitable. For BlueFive Capital, acquiring Bugatti is not merely about buying an automaker but acquiring an extremely scarce top-tier luxury brand asset. With Bugatti's century-old heritage, immense brand premium, and influence among the world's ultra-wealthy, this is a lucrative deal when money is no object.

However, the biggest winner appears to be Rimac's founder, Mate Rimac. After the transaction, Rimac Group will maintain its position as the controlling shareholder of Bugatti Rimac, and Mate Rimac, who also serves as CEO of Bugatti Rimac, will take over as president of Bugatti Automobiles.

A year earlier, Mate Rimac had separately offered Porsche a bid slightly exceeding €1 billion to acquire its entire stake in Bugatti Rimac. While negotiations progressed at one point, they ultimately fizzled out.

Now, without spending a dime, Mate Rimac has regained control of Bugatti from Porsche with capital infusion, retained his dominance at Bugatti, and secured backing from Silicon Valley VCs and Middle Eastern capital—a truly “epic” bargain.

03 €120 Billion Restructuring Cost

The core logic behind Porsche's sale of Bugatti is not difficult to understand: when the numbers don't add up, sentimentality is the first thing to be sold.

A few months ago, when Porsche first announced this move, it had just released its bleakest annual financial report in history. Group sales revenue declined by 9.5% year-on-year, shrinking from €40.08 billion to €36.27 billion. The automotive business's EBITDA margin fell from 22.7% to 13.3%.

Annual profit plummeted from €5.64 billion in 2024 to just €413 million, a staggering 92.7% drop. The return on sales collapsed from a healthy 14.1% to 1.1%, meaning that for every €100 in revenue generated, actual profit was only €1.10.

This dire situation stems not only from mounting sales pressure in the Chinese market but also from additional costs imposed by U.S. tariffs and a one-time special expenditure of €3.9 billion, all contributing to Porsche's current struggles.

Entering 2026, the situation has shown no signs of improvement. According to the latest first-half financial report, Porsche's revenue stood at €17.229 billion, down 5.1% year-on-year. Vehicle deliveries fell from 146,400 units to 122,300 units, a 16.5% decline—a new low since 2021. Not to mention, Porsche has already begun streamlining models and laying off staff to cut costs.

In contrast, while Bugatti is a top-tier asset, its annual production is extremely limited, typically not exceeding 100 units. However, the research and development cost for each model runs into the hundreds of millions of euros. This business model, while sustainable as a flagship for brand image when Porsche's financials were healthy, has become a liability now that Porsche itself is struggling.

Divesting from Bugatti—a high-investment, low-output asset—has naturally become a reasonable choice for Porsche to optimize its resource allocation.

According to overseas media estimates, by the time of the 2026 sale, Bugatti's cumulative losses under Volkswagen and Porsche's management had exceeded €10 billion, making it a veritable financial burden.

The immediate impact of shedding this heavy load was evident. Porsche stated that its forecast for the automotive business's net cash flow margin in 2026, as Announced in its mid-year report, had not yet accounted for the impact of this asset disposal transaction.

After factoring in the cash inflow from this transaction and additional funding support for pension obligations, Porsche expects its automotive business's net cash flow margin for 2026 to rise to between 5.5% and 7.5%, up from the previous estimate of 3% to 5%.

Finally, Porsche's actions must be viewed within the broader context of its parent company, Volkswagen Group, which is currently undergoing its largest-ever restructuring plan.

Volkswagen has recently confirmed that it will proceed with laying off 50,000 employees in the future. Including previously announced layoffs, the total workforce adjustments will reach 100,000 positions by 2030. Not only will four factories be shut down, but some will also be sold. Its production base in Osnabrück, for instance, has been confirmed to be taken over by Israeli defense firm Rafael Advanced Defense Systems.

The group also plans to significantly reduce model and product complexity: by 2035, the number of models will be cut by up to 50%, and product complexity will be reduced by up to 75%.

Recently, Reuters revealed that the bill for Volkswagen's unprecedented restructuring has been tallied: approximately €16 billion (around RMB 125 billion), covering costs for large-scale global layoffs and the exit of four German factories from production.

The €16 billion bill can be broken down into two major components: approximately €10 billion for layoff settlements, covering up to 60,000 positions globally, and around €6 billion for the exit of four German factories from production. This includes approximately €1 billion each for Emden and Zwickau, and around €2 billion each for Neckarsulm and Hanover.

With the parent company struggling to stay afloat, Porsche clearly cannot remain unscathed. This series of streamlining moves represents not only a correction of Porsche's past aggressive strategies but also a rational compromise by luxury automakers during a downturn.