By Max Bernhard

Volkswagen AG took another big earnings hit Wednesday from its diesel-emissions crisis and warned that new testing standards pose a further risk for the world's largest car maker.

The German car making giant said it incurred EUR1.6 billion ($1.87 billion) in higher costs in the second quarter from the emissions-cheating scandal, which already has led to more than $25 billion in penalties, fines and compensation for customers.

Volkswagen admitted in 2015 to rigging nearly 11 million diesel-powered vehicles with software that allowed them to cheat on emissions tests. The aftermath has led to sweeping management changes.

In June, the chief executive of Volkswagen luxury unit Audi, Rupert Stadler, was jailed after prosecutors said they were worried he might try to interfere in their probe. Audi cars were among those fitted with the software that manipulated test results. The arrest came days after German prosecutors imposed a EUR1 billion fine on Volkswagen, also in relation to the emissions-cheating scandal.

Volkswagen named Audi sales chief as the brand's interim CEO while Mr. Stadler works to clear his name. Mr. Stadler, who hasn't been charged with any wrongdoing, has in the past said he had no prior knowledge that illegal software had been installed on Volkswagen or Audi engines.

The fallout from the emissions scandal threatens to continue to dent Volkswagen's prospects. Regulators are introducing a new testing regime for cars, called Worldwide Harmonized Light Vehicle Test Procedure, or WLTP, due to take effect in September.

Herbert Diess, Volkswagen chief executive since April, warned Wednesday that "great challenges lie ahead of us in the coming quarters -- especially regarding the transition to the new WLTP test procedure."

Shares in the Wolfsburg, Germany-based car maker fell as 2% midmorning in Frankfurt.

Mr. Diess also warned that increasing protectionism was a challenge for car makers, echoing concerns expressed by his U.S. and European counterparts.

Auto makers globally have had to content with Chinese tariffs on U.S.-made vehicles, as well as higher raw-material prices due to U.S. tariffs on steel and aluminum imports.

Volkswagen's German peer Daimler AG, as well as the Detroit big three -- General Motors Co., Ford Motor Co. and Fiat Chrysler NV -- last week warned that rising trade tensions and tariffs would impact earnings.

Volkswagen has said previously that availability of certain models and thereby sales and earnings could be hit by the changeover to the new emissions regulation, which comes into effect on September 1 in Europe. Chief Financial Officer Frank Witter said business in the second half could be "volatile" because of the new testing standard.

The car manufacturer said net profit in the April through June period rose to EUR3.23 billion from EUR3.04 billion in the year-earlier period. Sales rose 3.4% to EUR61.15 billion. Analysts had expected net profit of EUR3.21 billion and revenue of EUR62.68 billion, according to a consensus estimate provided by FactSet. The company confirmed its 2018 guidance -- excluding one-time items.

Write to Max Bernhard at Max.Bernhard@dowjones.com

(END) Dow Jones Newswires

August 01, 2018 05:13 ET (09:13 GMT)

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