VW loses $2.41B on big charge for recall

Sales expected to be resilient, German automaker says

FRANKFURT— Volkswagen lost € 1.67 billion ($2.41 billion) in the third quarter as it set aside € 6.7 billion to pay for recalling and fixing cars that were rigged to evade U.S. diesel emissions tests.

But while the German carmaker warned Wednesday that operating profit this year would be “down significantly,” it indicated that sales would prove resilient.

The company stuck to its prediction that unit sales would be on a level with last year’s record 10.14 million. Ordinary shares in Volkswagen AG rose 1.9 per cent to € 124.15 in afternoon trading in Europe.

Volkswagen, based in Wolfsburg, Germany, had already announced the set-asides for the recalls, so market analysts expected the quarterly loss, the company’s first in over a decade. The result was in fact not as bad as analysts’ expectations for a loss of € 2.11 billion, as compiled by financial data provider FactSet. Sales revenue rose 5.3 per cent to € 51.5 billion. Chief financial officer Frank Witter said the company had “solid and robust” cash resources to meet the financial impact of the emissions scandal. The cash reserves have been buttressed by € 3 billion from the sale of shares in Suzuki. The cost “is enormous but manageable,” he said.

Analysts say the impact will likely be several times larger than the setasides, including fines, recall and repair costs, and possible lost sales due to damage to the company’s reputation. The scandal became known on Sept. 18, near the end of the quarter, so any impact on quarterly sales was slight.