Volkswagen Is Dogged by Emissions Scandal -- WSJ
August 02 2018 - 3:02AM
Dow Jones News
By Max Bernhard
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 (August 2, 2018).
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 second-quarter costs from fines and legal
fees linked to the emissions-cheating scandal, which already has
led to more than $32 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 were down
almost 2% late morning 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 compliance costs would be "significant," he said, though
difficult to accurately quantify at this point.
Heightened regulatory attention will effectively lead to
emissions standards being tightened every year, Mr. Diess said.
That adds complexity to certifying new vehicles and, he said, could
drive Volkswagen to reduce the number of models it offers across
its brands.
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 02, 2018 02:47 ET (06:47 GMT)
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