By Nina Trentmann 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 24, 2018).

Volkswagen AG is looking to return to the U.S. bond market for the first time since its emissions scandal, a move that would seal a successful turnaround for the German auto maker.

A frequent debt issuer before the diesel scandal, Volkswagen has relied on a EUR20 billion ($24.7 billion) bridge loan, asset-backed securities and commercial paper to cover its financial needs.

The company already has tested the waters in Europe, where its EUR8 billion bond issued a little over a year ago was snapped up by investors. It isn't clear when the U.S. deal would come to market or what the size of such an offering would be.

The auto maker's Chief Financial Officer Frank Witter said reopening access to the bond market was a key focus of his job, which he took on less than a month after it was revealed in September 2015 that the German auto maker systematically cheated on emissions tests in the U.S.

The recent management shake-up at the German auto maker hasn't altered it debt plans, the company said. Herbert Diess was appointed as chief executive of the auto maker earlier this month, abruptly replacing Matthias Müller. Mr. Witter also took on oversight of the company's information technology unit as part of the changes. VW reports earnings on April 26.

Mr. Witter has been laying the groundwork for a comeback over the past 2 1/2 years meeting with scores of investors, bankers and analysts. He said he was "bluntly open" about the company's strengths and weaknesses with them.

"The communication we have seen from [Mr.] Witter has been a huge improvement compared with what we saw from Volkswagen in the past," said Kristina Church, an analyst at Barclays PLC.

Still, there is more work ahead to rehabilitate the company's reputation with investors. Default insurance on Volkswagen debt is more expensive than for other car makers, including Japanese competitor Toyota Motor Corp., a sign that investors remain cautious.

Volkswagen, which last issued U.S. debt in May 2015, has $1.8 billion of bonds maturing this year, and another $1.75 billion in 2019. The auto maker could issue between $1.5 to $2 billion in dollar-denominated debt this year, said a banker familiar with the company.

"You always, particularly when you return [to the bond market], want to size the deal right," said Mr. Witter.

Volkswagen at group level had EUR18.03 billion in cash at the end of 2017, but the company also faces high spending requirements. The diesel scandal cost over EUR19.1 billion as of Dec. 31, 2017. The company also pledged to spend EUR34 billion by 2022 on a wide-ranging mobility and digitization effort. Volkswagen had total borrowings of EUR163.47 billion, versus earnings of EUR11.63 billion as of Dec. 31, 2017.

Similar to its competitors, Volkswagen is still adjusting to the changes transforming the auto industry, including the move toward electric and self-driving vehicles and potential alterations to global trade networks.

"We are experimenting like many others with what the customer really wants," Mr. Witter said. Volkswagen invested in ride-hailing company Gett and in car sharing company Moya under his watch.

The car maker also set up a pilot factory in Salzgitter, around 33 miles away from its home in Wolfsburg, where it builds battery cells for electric cars. Volkswagen currently sources such batteries from third-party suppliers such as LG Electronics Inc. The company could make its own batteries in the future if there is a cost benefit or a technological advantage to it, the CFO said.

"What's difficult to predict is exactly what customers are looking for and how to make money with it," Mr. Witter said. Volkswagen is still generating the bulk of its revenue from selling cars but is considering new pricing models, "for services we never offered in the past," he said.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

(END) Dow Jones Newswires

April 24, 2018 02:47 ET (06:47 GMT)

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