BENTLEY, it would appear, is a licence to print money.
The formula seems foolproof. Take the best of the Volkswagen Group’s sunk engineering costs and intellectual property, integrate it in a broadly cohesive fashion, dress it in agreeably bespoke clothing and then virtually name your price.
Therefore it seems almost inconceivable that Bentley is on the nose financially. And Volkswagen Group's main shareholders, the Piech and Porsche families, have issued Bentley an ultimatum to become profitable within two years.
As recently as 2016, Bentley was a good news story. The marque shipped 6.4 percent more vehicles than it did the previous year, and even when accounting for the costs involved in launching the Bentayga, profits were still €112 million (A$178 million).
This ought to have been Bentley’s ‘Porsche Cayenne moment’ when sales volumes went berserk, paymasters Volkswagen gaped in awe and the team in Crewe could roll around in varied states of undress in bottomless baths of £50 notes.
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It didn’t pan out that way. The spectre of a no-deal Brexit has haunted the company for the past couple of years. According to World Trade Organisation terms, imports to the UK from the EU will be subject to a 10 percent tariff should Britain fail to agree a deal for post-Brexit trade.
CEO Adrian Hallmark is fully aware of the implications of crashing out of Europe. “Best case, it’s an annoying impact on our annual profitability,” Hallmark said.
“Worst case, it’s quite damaging on our annual profitability so a full no-deal Brexit would hurt us as a company, it would limit ability to invest.”
Exchange rate fluctuations due to Brexit have also contributed to Bentley’s 2018 woes, there have been issues with WLTP emissions testing and also a problem integrating some of the gearbox calibration software in the new Continental GT, which delayed its launch significantly
Volkswagen isn’t buying excuses though. German newspaper Handelsblatt claimed VW insiders said the recent Continental GT launch was the "worst production ramp-up of all time.”
"The important thing is for every [VW Group] brand to generate a reasonable contribution margin," Wolfgang Porsche, head of the families, told the Frankfurter Allgemeine Zeitung.
"That is not currently the case at Bentley, and we are not satisfied."
"It can only be one to two years," said Hans Michel Piech, outlining the limits of the company’s patience.
Bentley lost €137 million (A$218 million) in the first nine months of 2018 against a small profit in the same period in 2017, according to the latest Volkswagen Group reports.
Returning Bentley to profitability should be relatively straightforward. It’s merely a case of cutting back on marginal investments, streamlining production of Continental GT, and accelerating launch dates for V8 Conti GT variant, with priority on the Chinese and US markets.
Hallmark, who was once in charge at Porsche UK, needs to borrow from Porsche’s expertise at creating high-margin special editions.
He’s also looking to the Germans to share expertise in electric vehicles gained from the Taycan development. One thing’s for sure, though. Bentley must direct its available resources towards effortlessly luxurious sedans and GT cars rather than more overtly sporting models.
Volkswagen may well have put Bentley on probation, but we’re not pessimistic about its chances. The product is too good for it to fail.