Bentley, Lamborghini and Seat are a drag on VW

Volkswagen is basking in the glory of record sales and profits, but it's not all good news. The group's Bentley, Seat and Lamborghini brands still continue to record poor performances.

At its annual investors conference today, VW said 2010 was " the most successful year" in its history with 7.2 million unit sales and an operating profit of 7.1 billion euros.

But a deeper look at the numbers shows that Europe's biggest automaker and aspiring global No. 1 has some trouble spots.

Bentley's operating loss last year widened by 51 million euros to 245 million euros, despite an 11 percent rise in unit sales to 5,117. VW CFO Hans Dieter Poetsch said today it was too early to say if the brand will be in the black in 2011 but he did not rule it out. He said Bentley was hit last year by a combination of difficult conditions in the luxury market and the need for one-off expenditure on new products.

VW's struggling Spanish subsidiary Seat only had a slight recovery last year, narrowing its operating loss by 28 million euros to 311 million euros on a 0.8 percent rise in sales to 340,000 vehicles.

Lamborghini lost an undisclosed amount of money as sales fell 14 percent to 1,302 and revenues declined by 10 million euros to 271 million euros.

Winterkorn upbeat

But VW CEO Martin Winterkorn was upbeat. He said growing demand for luxury products in China and India meant the prospects for Bentley are promising. Seat, he said, "is bouncing back" after regaining the market lead in its Spanish home market for the first time in 31 years. And demand for exclusive sports cars like Lamborghini's models is picking up.

Still, even if these brands continue to underperform, VW can count on its luxury unit Audi, its core VW brand and Czech subsidiary Skoda for good news.

The VW brand saw deliveries rise 14 percent to 4.5 million, helped by growth in Russia, China and the United States. Operating profit for 2010 was 2.2 billion euros, up from 561 million euros in 2009.

Skoda had record unit sales of 763,000, up 11.5 percent, with strong growth in China, Russia and India. This helped to more than double its operating profit to 447 million euros.

Last year, Audi had the best-selling and most profitable year in its history, with a 15 percent increase in unit sales to 1.1 million and operating profit more than doubling to 3.3 billion euros.

In the near future, the highly profitable Porsche brand will be added to VW's portfolio. And VW has the cash resources to take over Fiat's Alfa Romeo if VW Chairman Ferdinand Piech can wrench the money-losing brand away from a reluctant Sergio Marchionne.

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