IT is not built in a factory, but in a luxury French chateau. It is more powerful than Michael Schumacher's Formula One racing car. It is years behind schedule and so expensive that only a handful will ever be built. What is it? The Bugatti Veyron.

Conceived in a moment of madness, the Veyron was supposed to be the ultimate expression of VW's creative and engineering genius. Instead, it has come to symbolise the group's ills. Famously, it was created as a result of a boast. Ferdinand Piech, the product man who rose through the ranks to lead VW, reckoned Bugatti would be the perfect vehicle for a supercar.

He ignored the fact that the company had a history of turning large fortunes into small ones. Ettore Bugatti poured his wealth into the Royale, a 300bhp beauty that was fashioned to become the world's most luxurious car. It was introduced just in time for the Great Depression and only three were ever sold. Old man Bugatti was forced to give up on the car - and the company - shortly after the outbreak of the Second World War.

More recently, Bugatti re-emerged during the late 1980s with another supercar, the EB220, which was, for a short while, rather successful.

But Bugatti was famous for spending vast sums to no apparent good - who else would build a factory to make one car? And why engineer a four-seater variant no one wanted?

Despite a couple of good years, the idea soon fell apart and the Bugatti name was up for sale once again. Enter VW.

Amazingly, for a company as pragmatic as VW, the Bugatti team seemed to ignore the lessons of recent history.

That's why the Veyron is put together not in a VW factory, but a French chateau expensively fitted out for car production.

Even worse, Piech had decreed the Veyron would be the most powerful car ever built. That meant more than 1000bhp and a top speed of 250 mph.

Cars had come close to the top speed (the McLaren F1 could reach about 230mph in favourable conditions) so reaching the magic 250 mark should have been simple - just give the car a little more of everything. The reality has been rather different. The engineers struggled to keep the engine cool. Every transmission they tried was mangled by the incredible torque and the brakes struggled to slow the beast from its incredible top speed before they overheated spectacularly. Within the industry, the Veyron became known as "Piech's folly".

The solutions have delayed Veyron by two years and made it hugely expensive to build and sell. It hits the road with four-wheel drive, stability and traction control, hydraulics that change the aerodynamics as it goes faster and a spoiler that turns into an airbrake at high speeds to assist those brakes. Even the tyres had to be developed from scratch and at great expense so they could survive a puncture at 250 mph.

Each car takes six weeks to build (although Bugatti hopes it can eventually reduce that to three and then one week eventually), meaning a production run of fewer than 50 cars in a full year of production. Only 300 will ever be made.

The list price is a stunning one million euros (£714,285) and that is before VAT (which works out at an eye-watering £125,000). Oh, and fifty quid for number plates and tax if you live in the UK.

Nor is the Veyron environmentally sound. At full speed - admittedly not something you will achieve every day - it guzzles a gallon of high-octane gas every 2.7 miles. That means it will run out of fuel after 12 minutes and you will have covered a mere 50 miles. It is fair to say that many VW shareholders will be glad when the Veyron saga is over. They see it as a huge embarrassment, especially at a time when VW is laying off workers and scaling back production in the face of a stagnating market.

Garel Rhys, Cardiff Business School motor industry analyst, probably summed it up best when he said: "It's sheer madness. It will be impossible for the car to make back the money that has been spent on it in this time of cheap imports from Asia threatening the profitability of VW's bread-and-butter cars."