Volkswagen sets aside extra €400m for diesel scandal
Volkswagen has set aside another €400m to cover the costs of the diesel scandal, but raised expectations for its annual revenues amid improving market conditions.
The German car maker said that annual sales would “match” last year’s total, beating previous guidance that they would fall by up to 5 per cent, write Peter Campbell in London and Patrick McGee in Frankfurt. In the third quarter of the year, VW saw sales revenues climb 1 per cent to €52bn, with a pre-tax profit of €3.34bn, compared to a loss of €2.52bn a year earlier.The company said: “Earnings in the third quarter were impacted by further provisions recognised in connection with the diesel issue of €0.4 billion”.
This takes the total amount set aside to cover dieselgate costs, fines and consumer redress to €18.2bn so far.
Analysts previously warned the company may face “provision creep”, where it sets aside more every quarter as legal bills and prospective payouts mount.
Earlier this week VW’s deal to compensate US owners of affected diesel cars was approved by a judge in California. The $15bn deal covers compensation for the owners of nearly 500,000 VW diesel owners.
Arndt Ellinghorst, analyst at Evercore ISI, said before the results that the current quarter would be critical for understanding the investment case for VW. Not only is the US Department of Justice expected to announce a criminal fine for VW following last year’s diesel emission scandal, providing clarity for investors, but VW’s different brands are set to give a presentation on their long-term strategies.
But despite the upgrade to sales forecasts, performance at VW’s core passenger car brand, which accounts for half of group revenue but has struggled with profitability, remains below last year.
In the first nine months the marque sold 3.2m cars, below the 3.3m hit last year, and operating profits fell from €2.2bn to €1.2bn. Chief finance officer Frank Witter said: “Despite major challenges and the negative impact of the diesel issue, the Volkswagen Group remains on a solid financial footing.”