Pollution scandal clouds VW's bottom line

The financial consequences of the company's falsified diesel emissions tests begin to show up as the firm reports its first loss in years.

Andrew Krok Reviews Editor / Cars
Cars are Andrew's jam, as is strawberry. After spending years as a regular ol' car fanatic, he started working his way through the echelons of the automotive industry, starting out as social-media director of a small European-focused garage outside of Chicago. From there, he moved to the editorial side, penning several written features in Total 911 Magazine before becoming a full-time auto writer, first for a local Chicago outlet and then for CNET Cars.
Andrew Krok
2 min read

Recalling and repairing its offending diesel vehicles is going to cost VW billions of euros.

Ralf Hirschberger/dpa/Corbis

VW's emissions scandal has polluted the carmaker's financial results, causing the company's first quarterly loss in more than a decade and a half.

Whether or not you drive a Volkswagen, you've probably heard about the company cheating on diesel emissions tests. In September, VW admitted to using software to fool the tests, even though its diesel vehicles emitted more nitrous oxide than legally allowed when on the road.

Since then, the Germany-based automaker has been embroiled in a series of lawsuits and investigations as it attempts to hammer out a fix for all 11 million affected vehicles. On Wednesday, the financial consequences of the fraud began to become apparent.

Volkswagen Group reported a net loss of €1.67 billion ($1.85 billion, £1.2 billion, AU$2.59 billion) in the third quarter of 2015, with costs associated with recalling and repairing the diesel vehicles totaling €6.7 billion in the quarter alone. In the same quarter last year, Volkswagen Group posted a €2.97 billion profit.

The current third-quarter results are only a small slice of the financial-fallout pie, as Volkswagen's admission of wrongdoing came just two weeks before the end of the reporting period. Considering that investigations are still under way worldwide and legal battles are likely to spill over into the next year, the automaker is nowhere near done paying for its transgressions.

As a result of the diesel issue, the company has changed its outlook for the rest of the year. Volkswagen now expects operating profit, a measure of pretax profit, for both the group and passenger cars business to be "down significantly year-on-year."

The company's net cash and liquid assets shot up nearly 30 percent because it sold its stake in Suzuki Motor Corporation. That money will come in handy, Volkswagen said, in helping to settle the emissions problem.

"This will help us manage the challenging situation caused by the financial impact of the diesel issue," CFO Frank Witter said in a statement.

Despite the hazy outlook caused by the emissions scandal, investors appeared optimistic about Volkswagen's handling of the issue so far. The company's stock is up more than 4 percent, to €109.64 per share, on the Frankfurt Stock Exchange.