Volkswagen AG (VW) will pay a US$1.2 billion fine imposed by German prosecutors for cheating to get around diesel-emissions regulations, closing one chapter in a three-year-old crisis even as new developments arise.
The world’s biggest automaker accepts the fine and takes responsibility for its actions, Wolfsburg, Germany-based Volkswagen said in a regulatory filing on Wednesday after markets closed. The settlement of the criminal case will have a positive impact on other proceedings in Europe, it said.
“We work with vigour on dealing with our past,” Chief Executive Officer Herbert Diess said in a separate statement. “Further steps are necessary to gradually restore trust again in the company and the auto industry.”
VW still faces a multitude of probes both in Germany and abroad, with legal proceedings in 55 countries pending and investigations into stock-market manipulation in its home market. Investors have accused the company of informing them too late about the probe, a view the carmaker has contested, saying it couldn’t have known the issue would balloon as it did.
VW shares fell 0.7 percent to US$185 in Frankfurt yesterday. The stock is down 4.7 percent this year, valuing the auto manufacturer at US$92.5 billion.
Earlier provisions
The new fine comes on top of the US$30 billion in provisions related to rigged engine-control software that the company has already set aside. It will add US$1.16 billion to the diesel-related cash outflow of about US$4.65 billion that VW had anticipated for this year. VW had net cash of about US$28 billion at the end of the first quarter, providing a substantial liquidity buffer to digest the impact.
The rigging of as many as 11 million diesel cars worldwide was disclosed by United States (US) authorities in September 2015 and triggered the deepest crisis in the manufacturer’s history.
“The fact that the criminal risk has now been dealt with is good news,” said Arndt Ellinghorst, an analyst with Evercore ISI. “Paying out one billion euros is extremely painful but in the broader context it isn’t a material number.”
No end
While the company has shaken up management and introduced internal reforms, the crisis has continued to grind on. The settlement announced on Wednesday covers the company’s role in a diesel-rigging investigation in Braunschweig, whose court district includes Wolfsburg, but it doesn’t affect criminal probes against individuals, or civil claims and the shareholder lawsuits against VW. There are also probes in Munich focused on the Audi brand, and in Stuttgart covering Porsche.
Just this week, Rupert Stadler, the head of Audi, was named a suspect in the Munich case, and his home was raided along with another member of the unit’s management board.
The scandal has undermined consumer demand for diesel cars, a key element in automakers’ plans to meet stringent new emissions targets in Europe, and other manufacturers have also fallen under suspicion. Daimler AG, maker of Mercedes-Benz luxury cars, was hit with a mass recall this week after German regulators concluded that it too used illegal systems enabling the shutoff of emissions controls. The Stuttgart-based automaker, which has repeatedly denied being complicit in the kind of cheating Volkswagen undertook, will upgrade software in 774,000 vehicles in a deal enabling it to escape fines. - Bloomberg