GM General Motors Company

By William Boston 

Volkswagen AG significantly increased the money it set aside to pay for an emissions-cheating scandal, resulting in its worst annual loss, as authorities world-wide pursue new crackdowns on it and other car makers.

Germany's largest auto maker reported a net loss of $1.77 billion last year, stemming from an about $18 billion charge to earnings, up from $7.5 billion previously. The bulk of the higher set-aside covers a buyback of nearly 500,000 cars in the U.S., as well as legal claims from a global recall of 11 million vehicles.

Separately, German authorities on Friday required Daimler AG, Volkswagen and General Motors Co. to recall 630,000 diesel-powered cars to repair defective emissions controls, suggesting a wider problem in testing. French officials also raided offices PSA Groupe, maker of Peugeot and Citroën cars, this week. None of the latest recalls include accusations of wrongdoing.

"There is no question that the diesel issue is a heavy burden on the company's results," Chief Executive Matthias Müller said after a meeting of Volkswagen's supervisory board in Wolfsburg, Germany, on Friday.

He added there could be further costs from settlement discussions with the U.S. Justice Department and other authorities. Volkswagen this week reached a preliminary agreement to offer U.S. car owners a blend of car buybacks, repairs and compensation, and to pay an environmental fund for the cars' excess nitrogen-oxide emissions. The deal doesn't include potential U.S. criminal penalties or compensation for investors. The company also faces lawsuits in Europe.

"We still have a lot of work ahead of us," Mr. Müller said.

The company's financial results for 2015 were twice delayed while it pursued an investigation in the years-old deception that involved programming engines to dupe diesel-emissions tests. Though large, the charge provided some reassurance to investors.

The company's shares initially fell sharply in Frankfurt trading on Friday, but retraced some of the decline to finish the day off 1.3% at EUR125.45.

Volkswagen sold 10 million vehicles last year, a 2% decline from the year before and narrowly behind Toyota Motor Corp.'s 10.2 million vehicles. The company's revenue last year rose 5.4% to EUR213.3 billion. Directors proposed paying a symbolic per share dividend of 11 European cents for ordinary shares and 17 cents for preferred, down from EUR4.80 and EUR4.86, respectively, a year earlier. The financial impact so far outstrips that endured by other auto makers that were charged with improper conduct in connection with recalls in recent years.

General Motors admitted criminal wrongdoing in 2015 and paid more than $2 billion to settle U.S. charges and compensate accident victims, shareholders and others claiming injuries. It still faces continuing lawsuits stemming from a defective ignition-switch. Toyota paid a $1.2 billion penalty to the U.S. for misleading consumers about safety problems in 2015.

Volkswagen's stock price is down more than 20% since the emission-cheating scandal was disclosed in September, even after rising about 15% this week as the deal to compensate U.S. customers surfaced.

There were separate developments in Europe that appeared to show that fudging emissions results in diesel-powered engines could be more widespread.

Daimler, which makes Mercedes-Benz cars, said on Friday that it was conducting an internal investigation of emissions software at the request of the Justice Department. The probe pertains to the certification process of the company's diesel cars in the U.S. Daimler declined further comment but said it would cooperate with U.S. authorities.

In France, officials searched for documents at the headquarters PSA as part of a continuing pollution probe that included a raid of Renault SA offices earlier this year.

In Germany, Volkswagen, Audi, Porsche, General Motors' Opel, and Mercedes-Benz agreed to voluntarily recalls across Europe to fix engine-control software. The country's transport minister, Alexander Dobrindt, said the affected vehicles had engines that were tuned to suppress emissions control at low temperatures, a so-called thermal window that is allowed under European rules to protect engine components. But government tests of 53 models found a widespread practice of turning off emissions controls even at normal temperatures, he said.

"There are doubts whether the applied thermal window was always justified on some of the tested cars," Mr. Dobrindt said, but he added that it wasn't illegal.

GM's Opel business unit and Mercedes-Benz owner Daimler welcomed the report as confirmation that they never deployed an illegal device to game emissions tests. The manufacturers said they would take measures to further reduce nitrogen-oxide emissions.

"No vehicle was identified that used the same defeat device software as Volkswagen," Mr. Dobrindt said.

The government study was commissioned in the wake of the Volkswagen scandal to see if other diesel manufacturers were also cheating. Mr. Dobrindt said non-German brands were also tested, including Alfa Romeo, Chevrolet, Dacia, Hyundai, Jaguar, Jeep, Land Rover, Nissan and Suzuki.

Volkswagen began this week to make considerable progress in resolving its emissions-cheating scandal more than six months after admitting it manipulated diesel-engine software to suppress emissions in the lab but allow higher nitrogen-oxide levels during normal driving.

While Volkswagen reached a preliminary deal with U.S. authorities and car owners this week, it still hasn't answered key questions about the scandal, especially who decided to manipulate the engines and whether top executives were involved. The company commissioned U.S. law firm Jones Day to carry out an investigation and had promised an interim report this month.

However, Volkswagen is under pressure from the Justice Department not to release key facts in the case while the government's criminal investigation continues.

Wolfgang Porsche, patriarch of the clan that controls a majority of Volkswagen's voting stock, said the company wouldn't release details of its internal investigation until there is a final settlement with the Justice Department.

"Publication at this time would bear unacceptable risks," Mr. Porsche said.

--Ruth Bender and Ilka Kopplin contributed to this article.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

April 23, 2016 02:47 ET (06:47 GMT)

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