(CS) Volkswagen : Worrying revelations -CO2 irregularities could be much more expensive than NOx
* Investigations expanded into CO2: VW released a statement that internal
investigations found unexplained inconsistencies when determining Type
Approval CO2 levels. Company indicated that around 800,000 cars are
being affected with economic risk estimated at €2bn, implies €2,500 per car
vs. c.€609 per car provisioned for Diesel so far; thus the ratio is 4.1x. At this
point the legality of the "inconsistencies" is unclear since no further details
are known, but VW indicates that a reliable assessment of the scale of the
irregularities is not yet possible.
* What's next?: This statement comes one day after the EPA made
allegations against 3.0 liter Diesel engines (also Porsche Cayenne) of also
using defeat devices, which VW subsequently denied. With investigations
still ongoing, the key question remains if there are any further disclosures to
be made. Furthermore after the EPA announcement yesterday and today's
release we see Volkswagen's credibility further deteriorating.
* Maintain UP – uncertainty not priced in: At this point the financial impact
from today's release is unclear, as only limited details have been provided.
However, given that that provisions per vehicle are 4.1x higher versus the
NOx issue, the magnitude could be much bigger in scale. In our view,
today's announcement could concern those who believe that the economic
impact is manageable and more than priced in post the drop in share price.