Scandal-hit Volkswagen posts first loss in 15 years
Volkswagen posted its first quarterly loss in at least 15 years yesterday and said the €6.7bn set aside to cover the costs of its rigging of diesel emissions tests was likely just a start.
The news came as the carmaker's new chief executive officer prepares to fly out to China with German Chancellor Angela Merkel and other business leaders to promote trade in a major export market and to try to limit the fallout from a scandal that has rocked the auto industry, and German industry.
Almost six weeks after it admitted to using illegal software to cheat US diesel emissions tests, Europe's biggest carmaker is under pressure to identify those responsible, fix up to 11 million affected vehicles and convince regulators, investors and customers that it won't make the same mistakes again.
The biggest business crisis in its 78-year history has wiped more than a quarter off VW's stock market value, forced out its long-time chief executive and tarnished a business held up for generations as a model of German engineering prowess.
New ceo Matthias Mueller said yesterday that the cost of the scandal would be "enormous, but manageable," without giving details. He said VW had hired consultants Deloitte to support an investigation by US law firm Jones Day, and that those responsible would face tough consequences, without elaborating.
Mueller also said VW would focus more on profitability than sales volumes in future. His predecessor, Martin Winterkorn, set VW the goal of becoming the world's biggest carmaker by sales volumes, and critics have said this may have inadvertently led to the use of software that allowed VW to disguise the level of real toxic emissions in its diesel engines.
Though Mueller has promised far reaching change, some analysts and investors have questioned whether the company veteran is the right man to lead the overhaul, which they say needs greater openness from the family, local government and trade union interests that control the carmaker.
"That Volkswagen now finds itself in this current situation is something that some might say is not so surprising," said Yngve Slyngstad, the ceo of Norway's wealth fund which owns a stake in VW and has been a critic of its corporate governance.
He added it was too early to say whether the steps taken by VW's new leadership were enough, as his own fund posted a quarterly loss on its investments in part due to the plunge in VW shares. VW itself reported a third-quarter operating loss of €3.48bn.
It set aside €6.7bn in the July-September period to cover costs related to the scandal, up from the €6.5bn announced a week after the cheating became public on September 18.
The group said it now expects operating profit to drop "significantly below" last year's €12.7bn, despite sales matching last year's record level.
The costs of the scandal so far are largely related to refitting affected vehicles, and are to rise due to regulatory fines and lawsuits. (Reuters)