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German automaker Volkswagen successfully sold its marine engine division, Everise, but the achievement has been overshadowed by plans for the largest job cuts in the company's history, the Financial Times (FT) reported on June 29 (local time).
On June 25, Volkswagen announced that it had secured 7.4 billion euros from the sale of a majority stake to U.S. private equity firm Bain Capital, but it did not disclose the total value of the deal.
According to multiple sources, Volkswagen valued Everise at nearly 10 billion euros, including debt, during the bidding process.
This figure significantly exceeds the 6 billion euros the company had initially expected when it began the sale process last year.
The report noted that Volkswagen was able to secure 7.4 billion euros despite selling only a 51% stake by utilizing a financing method that increased Everise's debt.
The private bidding process, which took place over the last 10 months, saw intense competition among three private equity firms: Bain Capital, CVC, and EQT.
Volkswagen required all bidders to complete preliminary legal procedures the day before the bid to ensure a swift contract signing once the winner was decided.
Sources said that while all candidates valued Everise similarly and agreed to guarantee employment and the continuation of existing business sites until 2030, the package offered by Bain Capital was deemed the most superior.
The FT reported that industry advisors view the sale of the Everise stake as a record-breaking deal that generated massive profits for Volkswagen.
However, just two days later, news emerged that Volkswagen plans to cut up to 100,000 jobs.
The restructuring plan, which is set to be submitted to the Volkswagen supervisory board in July, is expected to be the largest in corporate history, surpassing the scale of cuts seen at General Motors (GM) and IBM in the 1990s, according to the FT.
The massive plan involves eliminating nearly one-sixth of its 625,000 total jobs and closing four factories.
UBS analyst Patrick Hummel predicted that the profits from the Everise sale could be offset by new restructuring costs, making it difficult to increase shareholder dividends.
"It is highly likely that additional restructuring costs amounting to billions of euros will occur in the second half of this year," Hummel said. "From a shareholder perspective, the excitement from the Everise deal has almost vanished."
The FT pointed out that Volkswagen CEO Oliver Blume faces the challenge of deciding whether to carry out large-scale restructuring and asset sales while simultaneously securing the investments needed for next-generation vehicle development.
Volkswagen has hinted that it could sell additional non-core assets, such as its stakes in its battery unit, PowerCo, and its autonomous driving unit, ADMT.
The company has already reduced its stake in its truck manufacturing division, Traton.
One source stated that there are conflicting views on potential future asset sales: an optimistic perspective that the proceeds will be used for investment, and a pessimistic view that the money will simply disappear into ongoing inefficiencies.
Some speculate that following the successful sale of Everise, Volkswagen might consider selling core assets, such as the motorcycle brand Ducati or an initial public offering (IPO) for the supercar brand Lamborghini.
However, some analysts point out that the likelihood of Volkswagen selling these brands is low, and that offloading loss-making assets like PowerCo would not be as profitable as the Everise sale.
The CEO of Scout, Volkswagen's U.S. pickup truck brand, has stated that an IPO is also one of the options.
(Photo: Getty Images Korea)
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