Volkswagen’s Net Loss of $1.84 Billion And The Huge Cost of Deceit
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For 15 years, Volkswagen was on an earnings roll, posting quarterly profits despite a devastating U.S. recession and the impact of the September 11 terrorist attacks.
That came to a halt on Wednesday. VW reported a net loss of $1.84 billion in the third quarter, a steep fall from its profit of nearly $3.3 billion in the year-ago quarter.
The sole reason was the emissions cheating scandal that has enveloped VW in the United States and Europe. VW said it has put aside $7.3 billion to cover the initial cost of repairing cars with diesel engines and indemnifying their owners, and analysts believe that number is bound to rise in coming months.
In fact, VW said it expected 2015 net income to be “down significantly” from its 2014 results.
VW has halted sales of diesel powered cars in the U.S., where the cheating scandal was discovered on Sept. 18. VW admitted that its cars were equipped with a “defeat device” allowing their diesel emissions to be measured in normal ranges, when in fact the cars were exceeding pollution limits.
VW’s chief executive, Martin Winterkorn
The device affects 500,000 cars in the United States, and some 8.5 million across Europe. There also are investigations underway in many of VW’s other global markets, including South Africa, Japan and China.
The scandal has brought down VW’s chief executive, Martin Winterkorn, and created a mess for his successor, Matthias Muller. And, even VW admits it doesn’t know how it’s going to resolve the situation.
Alexander Dobrindt, Germany’s federal minister of transport and digital infrastructure, told journalists in Washington that it will take more time before VW can announce a timetable for fixing cars in the U.S.
“There are still no plans for a comprehensive recall, there is still no
clear course for how the technical aspects will be handled,” he said, according to Bloomberg . “It will take another couple of weeks before we know how the technical modifications can be made.”
Dobrindt said he thinks U.S. regulators view the issue as a one-time problem involving emissions, not a broader scandal affecting the
Alexander Dobrindt
German automaker. He met with Transportation Secretary Anthony Fox and with officials of the Environmental Protection Agency, which first uncovered the issue.
Germany has vowed to work with the U.S. on finding a solution. Muller, in a news release issued Wednesday, said the implementation strategy would begin in January, which no doubt will put pressure on the company to come up with a solution.
In the meantime, VW may have suffered another blow to its global dominance. It passed Toyota this summer to become the world’s biggest car maker. But, sales figures indicate Toyota took the title back during the third quarter.
Culled from Forbes
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