Emissions scandal pushes VW into loss
Wednesday, 28 October 2015 14:16
VW production lineImage copyrightGetty Images

Volkswagen has reported its first quarterly loss for at least 15 years after taking a big charge to cover the costs of its emissions scandal.

VW admitted installing software to cheat emissions tests in 11 million of its diesel cars worldwide in September.

VW said it had set aside €6.7bn ($7.4bn; £4.8bn) to cover the scandal, leaving it with a €2.52bn pre-tax loss for the third quarter of the year.

Despite the scandal the company still expects sales to grow this year.

However, VW said it expected profits for the full year to be "down significantly".

The €6.7bn charge is likely to be the first of a raft of costs that the company has to face. The chief financial officer, Frank Witter, said: "No penalties or fines [or] compensation to customers have been included [in the €6.7bn charge"]

"The financial burden is enormous but manageable ... but we will emerge stronger and leaner than ever before."

Legal action

VW says the legal costs of the scandal "cannot be estimated at the current time". But it added: "Considerable financial charges may be incurred as the legal risks crystallize."

In its quarterly report, it outlined the types of litigation it expects to face:

  • Criminal and civil charges from national regulatory authorities.
  • Class action or individual civil lawsuits from customers.
  • Class action or individual civil lawsuits from investors.

In the three months to the end of September, vehicle sales fell 3.7% and production fell 11.6% compared with the same period last year. However, VW said that it was still forecasting a rise of up to 4% in sales revenue for the whole of the year.

Image copyrightGetty Images

At the scene: Emily Young, Wolfsburg

There's an air of defiance about VW's workers in Wolfsburg.

They feel that the reaction to the scandal has been overdone. The environmental damage is nothing compared to BP's Deepwater Horizon oil spill and the cars are still greener than the American gas guzzlers, they say.

Detractors would of course point to the fact that the problem lies more with the behaviour of the company than the impact on the environment.

But if VW is going to successfully navigate this crisis - it will need the backing of its workers. For now, it appears to have that.

VW crisis: The view from Wolfsburg

Broken trust

Commenting on the latest results, Matthias Mueller, VW's chief executive and chairman of the board of management, said: "The figures show the core strength of the Volkswagen Group on the one hand, while on the other the initial impact of the current situation is becoming clear.

"We will do everything in our power to win back the trust we have lost."

Meanwhile the group has started retrenching and announced earlier this month it would reduce its research and development budget. In the last three months it has reduced R&D by more than €1bn.

VW's shares have fallen some 25% since September when the US Environmental Protection Agency (EPA) found that many VW diesel cars being sold in America had devices that could detect when they were being tested, and artificially improve the results.

The group's chief executive, Martin Winterkorn, said his company had "broken the trust of our customers and the public" and resigned. He was replaced by Mr Mueller, the former boss of Porsche.

Volkswagen shares rose 3.2% after the publication of Wednesday's results, and were the best performing stock on the German Dax 30 index in the first hour of trade.

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