VW’s diesel damages approach US$24B after latest charge
Volkswagen AG’s provisions for the diesel-cheating scandal rose to 22.6 billion euros (US$23.9 billion), as the German carmaker continues to tally damages from the worst crisis in its history.
The company took a charge of 4.4 billion euros in the fourth quarter, more than double the total from the previous nine months, to reflect a settlement related to tainted larger diesel engines and a criminal plea in the U.S. As costs continued to mount, the company’s operating profit before special items rose 14 per cent to 14.6 billion euros last year, and sales margin improved to 6.7 per cent from six per cent a year earlier, according to a statement on Friday.
“In spite of the charges and the challenges arising from the diesel crisis, we can be satisfied on the whole with the group’s business development,” chief financial officer Frank Witter said in the statement issued after VW’s supervisory board met in Wolfsburg, Germany. “We must use great discipline to achieve the set targets in all divisions, in order to return to the path of success in the coming years.”
VW is still wrestling with the fallout from admitting in September 2015 that it rigged as many as 11 million diesel cars worldwide to cheat on emissions tests. The bulk of costs are in the U.S., where the company has agreed to a series of settlements, including buying back about half a million vehicles. In Europe, cars will be fixed but customers aren’t being compensated. The automaker still faces hundreds of investor lawsuits and a criminal probe in Germany.
Despite the burden of its scandal, VW plans to pay a dividend of 2.06 euros per non-voting preferred share — the company’s mostly widely held stock — and two euros per common share for 2016. Shareholder approval is effectively a formality as almost 90 per cent of the voting stock is held by the Porsche-Piech billionaire clan, its home state of Lower Saxony, and Qatar. Payouts amounted to 17 cents per preferred share and 11 cents per common stock for 2015, when the company posted its highest pre-tax loss ever because of the scandal.
VW overcame the damage to its reputation to still surpass Toyota Motor Corp. last year as the world’s best-selling automaker thanks to growth in China, where the scandal hasn’t been an issue. The owner of 12 auto brands ranging from budget-oriented Seat to sporty Porsche to heavy truck units Scania and MAN delivered a record 10.3 million vehicles in 2016, up 3.7 per cent from a year earlier.
Rising demand boosted revenue in 2016 by 1.9 per cent to 217.3 billion euros. The firm is forecasting sales will climb by as much as four per cent this year, with return on sales remaining steady between six per cent and seven per cent.
VW’s outlook is clouded by a cooling global car market, with demand in the U.S. and Europe set to peak after years of growth. China’s auto purchases also are forecast to slow after the government raised its sales tax on smallengine vehicles.