VW takes massive financial hit over emissions

  • 23/04/2016
(Reuters)
(Reuters)

Volkswagen (VW) says it will take a 16.2-billion-euro (NZ$26.44 billion) hit to its 2015 results and slash its dividend to help pay for its emissions-test cheating scandal.

The news came amid growing signs a regulatory clampdown in the wake of VW's cheating is affecting the broader industry, with Germany-based automakers including Mercedes-Benz and Opel - as well as VW - agreeing to recall a total of 630,000 cars to fix diesel engine technology blamed for high pollution.

On Thursday (local time), VW agreed a framework settlement with U.S. authorities to buy back or potentially fix about half a million cars fitted with illegal test-fixing software, and set up environmental and consumer compensation funds.

Analysts said the deal was crucial for VW to give a cost for the scandal in its 2015 results, which have been delayed since February, and provide a starting point for Europe's biggest carmaker to try to rebuild trust with investors and customers.

VW said on Friday the money it was setting aside to pay for the scandal would drive it to a 2015 operating loss of 4.1 billion euros. Full results are due on April 28.

However, analysts said the company could still face further costs, including potential U.S. Department of Justice (DoJ) fines as part of an expected civil settlement, and a DoJ investigation that could lead to criminal charges

There are also questions over whether it will offer compensation to the much larger number of diesel drivers affected outside the United States, as well as who will be blamed for the scandal in several ongoing investigations.

VW said on Friday it could not release preliminary findings from an investigation it commissioned from U.S. law firm Jones Day until it had reached an agreement with the DoJ.

Chief Executive Matthias Mueller also said he could not put a figure on the total cost of the scandal - which some analysts have estimated at about $US30 billion ($A38.77 billion) - but there was no reason to believe the 2015 loss would lead to job cuts.

VW said it planned to pay a dividend of 0.11 euros per ordinary share and 0.17 euros per preferred share on its 2015 results, down from 4.80 euros and 4.86 respectively the year before.

The preferred shares, down nearly 20 percent since VW admitted to cheating U.S. diesel tests in September, were down 0.8 percent at 126.05 euros mid-afternoon local time, after gaining sharply this week.

Engine management systems and software have come under increased scrutiny since the VW scandal broke.

Though no other carmaker has been found using the "defeat device" software employed by VW, regulators and environmental groups have criticised the wide use of engine management systems which switch off treatments for reducing emissions in order to improve performance and increase the interval between services.

European tests have found several carmakers using a legal loophole allowing them to throttle back emissions treatments under certain circumstances, ostensibly to protect engines.

Following extensive testing, the Germany's motor transport authority questioned whether the use of this loophole was always justified and necessary, a German official said on Friday.

The official said General Motors' Opel and Daimler's Mercedes-Benz, as well as VW brands Audi, VW and Porsche, had agreed to recall a total of 630,000 vehicles to tweak emissions management systems.

BMW, which invested in fuel saving technologies earlier than most rivals, was not part of the recall, the official said.

AAP

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