Volkswagen took a surprise charge of about €2.5 billion in the third quarter as plans to buy back or retrofit tainted diesel cars in North America proves more complex than expected, highlighting how the scandal continues to grip the automaker.
The additional provisions will hit operating results in the third quarter, which will be reported next month, the Wolfsburg, Germany-based company said Friday in a statement. The latest charge brings total damages from the diesel-cheating scandal, which erupted more the two years ago, to over €25bn. Volkswagen's third-quarter operating profit was forecast at €4.45bn, according to three analyst estimates compiled by Bloomberg.
“The size of the provision is surprisingly large, considering the numbers of cars involved isn’t very large,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “It shows VW remains some distance from coming through the scandal.”
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Volkswagen shares, which haven’t rebounded from the crisis, fell as much as 4 per cent to €132.85 and were down 2.9 per cent at 10:07 am in Frankfurt. The company didn’t specify why the issues in the US were more costly than anticipated.
The company has struggled to draw a line under the crisis. Munich prosecutors this week arrested a former Volkswagen engineer, the second person detained in the probe into cheating at the automaker’s Audi division. In addition to criminal probes in Germany, the company still faces hundreds of investor lawsuits as well as consumer complaints.
The continuing fallout from the diesel cheating crisis compounds the pressures facing the automaker as it grapples with the spending demands to develop next-generation vehicles. The world’s largest automaker plans to invest about €20bn by 2030 to develop a fleet of electric cars and another €50bn to buy the batteries needed to power the vehicles.
The move comes as the scandal set off a backlash that has led consumers to turn away from diesel technology amid concerns about pollution and driving bans. That creates problems for Volkswagen as it relies on diesel cars to boost profit and lower carbon-dioxide emissions to reach tightening European environmental targets.
