BERLIN: After emission cheat scandal, Volkswagen (VW) has slumped to its first quarterly loss in at least 15 years and said the $7.4 billion set aside to cover the costs of its rigging of diesel emissions tests was likely just a start.
The news came as the carmaker’s new CEO was about to fly out to China with German Chancellor Angela Merkel and other business leaders to promote trade in a major export market and try to limit the damage of a scandal that has rocked the auto industry.
Almost six weeks after it admitted using illegal software to cheat US diesel emissions tests, Europe’s biggest carmaker is under pressure to identify those responsible, fix up to 11 million affected vehicles and convince regulators, investors and customers that it won’t make the same mistakes again.
The biggest business crisis in its 78-year history has wiped more than a quarter off VW’s stock market value, forced out its long-time CEO and tarnished a business held up for generations as a model of German engineering prowess.
New CEO Matthias Mueller said on Wednesday the cost of the scandal would be “enormous, but manageable,” without giving details. He said VW had hired consultants Deloitte to support an investigation by U.S. law firm Jones Day, and that those responsible would face tough consequences, without elaborating.
Mueller also said VW would focus more on profitability than sales volumes in future. His predecessor, Martin Winterkorn, set VW the goal of becoming the world’s biggest carmaker by sales volumes, and critics have said this may have inadvertently led to the use of software that allowed VW to disguise the level of real toxic emissions in its diesel engines.
Though Mueller has promised far reaching change, some analysts and investors have questioned whether the company veteran is the right man to lead the overhaul, which they say needs greater openness from the family, local government and trade union interests that control the carmaker.
“That Volkswagen now finds itself in this current situation is something that some might say is not so surprising,” said Yngve Slyngstad, the CEO of Norway’s wealth fund which owns a stake in VW and has been a critic of its corporate governance.
He added it was too early to say whether the steps taken by VW’s new leadership were enough, as his fund posted a quarterly loss on its investments in part due to the plunge in VW shares.
