If you know anything about how the huge German automaker Volkswagen (NASDAQOTH:VWAGY) makes money, the headline to this article doesn't make sense. Tiny sports-car maker Porsche has been one of the biggest contributors to VW's bottom line in recent years.
But just as VW's finances are expected to come under heavy pressure as it copes with the fallout from its diesel emissions-cheating scandal, tiny Porsche is feeling the need to make some big investments -- and those investments will take another bite out of VW's bottom line.
A very important -- and expensive -- new Porsche
Porsche CEO Oliver Blume told reporters on Monday that investments required to develop and build future products will hinder its earnings growth for the near future, according to a Reuters report. What is probably the most significant of those future products is the one requiring the biggest of those investments: Porsche will spend 1 billion euros to create an all-new facility to build the brand's first-ever electric car.
Porsche surprised the world when it unveiled what it calls the "Mission E Concept" at the Frankfurt Motor Show last September. It's a battery-electric Porsche sports car, with a special new fast-charging system, and a claimed range of "over 500 kilometers," or more than 312 miles.
At the time, the Mission E was presented as strictly a "concept car," for show. But Porsche made it official in December: It's going to put the Mission E into production "by the end of the decade."
It's part of a larger VW push into battery-electric cars that was set in motion before the diesel scandal erupted. But new VW CEO Matthias Mueller appears to have stepped up the company's electrification efforts since last fall.
The Porsche will follow a new all-electric Audi SUV, likely to be called the Q6, that is expected to go into production in about two years. Both the Audi and the Porsche appear to share breakthrough battery and charging technology that looks likely to make them very competitive with Tesla Motors' (NASDAQ:TSLA) Model S and Model X.
An added squeeze on VW's bottom line
It's hard to estimate how big a dent the Mission E and other future-product programs will make in Porsche's (and thus VW's) earnings. Right now, we don't yet know exactly how much money Porsche made last year.
Volkswagen hasn't yet released its fourth-quarter and full-year 2015 earnings, and it may not for some time. The release, originally scheduled for March 10, was indefinitely postponed last week as Mueller and his senior team continue to grapple with the costs of the diesel scandal.
A year ago, Porsche generated 2.72 billion euros ($3.06 billion at current rates) in operating profit, up 16% on a 20% gain in sales. Blume said on Monday that Porsche "delivered a great result" again in 2015.
He made it clear, however, that Porsche's results will be more subdued for the next few years, and that won't help VW's already-stressed bottom line.
John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.