‘DIESEL GATE’ BILL HITS €25B
Surprise €2.5b charge in Q3 to wipe out half of VW’s projected earnings in last 2 years
VOLKSWAGEN AG (VW) will take a surprise charge of about €2.5 billion (RM12.66 billion) in the third quarter as plans to buy back or retrofit tainted American diesel cars proves more complex than expected, bringing total damages from the two-year-old scandal to over €25 billion.
The charge will wipe out more than half of Volkswagen’s projected €4.45 billion in earnings for the period, according to three analyst estimates compiled by Bloomberg. The additional provisions would hit operating results in the quarterly report due October 27, said the carmaker in a statement yesterday.
The sizable increase to VW’s financial woes comes a full 15 months after the company reached a settlement with United States authorities to either buy back or retrofit around 500,000 tainted vehicles.
VW shares, which haven’t rebounded from the crisis, fell as much as four per cent to €132.85.
The charge marks the most concrete reminder that the crisis is far from over and undermines VW’s efforts to look forward with aggressive plans to roll out a lineup of affordable electric cars in the coming years.
Meanwhile, Munich prosecutors on Wednesday arrested former VW engineer Wolfgang Hatz, the second person detained in the widening probe into cheating at the carmaker’s Audi division. In addition to criminal probes in Germany, the company still faces hundreds of investor lawsuits as well as consumer complaints.
The affected vehicles in North America are only a small part of the nearly 11 million rigged cars globally. While VW has worked to fix these cars, it’s rejected paying compensation to roughly eight million European owners. Porsche Automobil Holding SE, the investment vehicle that controls a majority stake in VW, said the company’s provision hike would negatively affect its thirdquarter results.
Still, the investment vehicle for the descendants of the VW Beetle’s creator stuck to a forecast for net income of at least €2.1 billion this year.
The continuing fallout from the diesel-cheating crisis compounds the pressures facing the carmaker as it grapples with the spending demands to develop next-generation vehicles.
The world’s largest carmaker plans to invest about €20 billion by 2030 to develop a fleet of electric cars and another €50 billion to buy the batteries needed to power the vehicles.