VW’s ‘Dieselgate’ bill hits $30b. after new charge
HAMBURG/BERLIN (Reuters) – Volkswagen is taking another $3 billion charge to fix diesel engines in the United States, lifting the total bill for its emissions-test cheating scandal to about $30 billion.
The German group is struggling to put the two-year-old “Dieselgate” scandal behind it and is working to transform itself into a maker of mass-market electric cars.
Last Thursday, Munich prosecutors said they had arrested a former Porsche management board member, the first top executive within the group to be detained amid a widening probe into cheating at VW’s Audi brand.
VW’s growing financial woes and Wolfgang Hatz’s arrest were also discussed on Friday at a regular meeting of the carmaker’s supervisory board, one person familiar with the matter said.
VW shares fell as much as 3% on Friday, as traders and analysts expressed dismay that the company was still booking charges for Dieselgate.
Evercore ISI analyst Arndt Ellinghorst said the news was unexpected and unwelcome, “not only from an earnings and cash-flow perspective, but also with respect to the credibility of management.”
VW, Europe’s biggest automaker, admitted in September 2015 that it had used illegal software to cheat US diesel emissions tests, sparking the biggest business crisis in its 80-year history. Before Friday, it had set aside €22.6b. ($26.7b.) to cover costs such as fines and vehicle refits.
FIXES HARDER THAN EXPECTED
Last year, VW agreed with US authorities to spend up to $15.3b. to buy back or fix up to 475,000 2.0-liter polluting diesel cars.
On Friday, VW said it was setting aside an additional €2.5b. ($3.0b.) as hardware fixes for the models were proving tougher than expected and would take significantly longer. Ellinghorst said the complications would amount to €5,200 per car.
“We have to do more with the hardware,” a VW spokesman said.
In Europe, where only a software update is required for the 8.5 million affected cars, plus a minor component integration for about 3.7 million 1.6-liter vehicles included in that number, fixes are running smoothly, the spokesman added.
The additional provision will be reflected in third-quarter results due on October 27, VW said.
Ellinghorst, who has an “outperform” rating on VW shares, expects the company to report third-quarter group earnings before tax and interest of €4.04b.
As recently as September 11, chief executive Matthias Mueller had maintained in an interview with Reuters that provisions made to date would suffice.
“It has now become clear that we need to do more,” a spokesman said on Friday, without elaborating.
‘WHAT MAY BE NEXT?’
VW said in September 2015 that about 11 million vehicles worldwide could be using software capable of cheating emissions tests. Audi, its luxury division, admitted two months later that about 83,000 vehicles with 3.0-liter V6 diesel engines were also fitted with an auxiliary control device deemed illegal in the US.