Volkswagen Group set a breathtaking loss of -$4.6 billion (-€4.1B) during 2015 because of the ongoing – and soon to get even more expensive – diesel emissions cheating scandal. The lawbreaking company based in Germany took a charge of $18.9 billion (€16.9B – with €16.2B solely for diesel cheating) for the year. The VW Group consolidated sales revenue rose by 5.4% to €213.3 billion during the period because of a richer mix of vehicle sales, profits from the Financial Services Division, and positive exchange rates.
If you back out the stunning dieselgate emission charges of €12.8 billion, VW’s operating profit was only slightly higher than the prior-year figure, a worrisome trend in a record global sales market. Toyota and General Motors are the likely beneficiaries of the ongoing VW Group corporate and brand image crisis.
The special VW items of – €16.2 billion are for the cleaning up the after effects of the vast diesel emissions scandal. That is to say these are charges for pending technical modifications and customer-satisfaction related measures on the dirty diesels, as well as considerable – rhapsody company destroying – legal risks globally. These devastating charges to shareholder value, allegedly, take account of the “identifiable risks in the 2015 annual financial statements,” VW claimed.
Well, maybe, maybe not. Moreover, VW is facing open stockholder suits and unknown ligation risks.
During the VW financial results press conference, the Supervisory and Management Boards of Volkswagen AG reneged on their promise to reveal the interim results of the diesel cheating scandal investigation, saying “it would present unacceptable risks for Volkswagen.”
Translation – billions more in charges – euros or dollars – are coming.
In a statement, the beleaguered lawbreaking company said, “Volkswagen’s complex negotiations with a large number of parties in the United States (including private plaintiffs and multiple U.S. regulators, including the Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Federal Trade Commission (FTC), the Attorneys General of each of the 50 states, and, in particular, the U.S. Department of Justice (DOJ) have entered a decisive phase sooner than anticipated and require Volkswagen to maintain the highest degree of confidentiality. The extensive and confidential nature of these negotiations and Volkswagen’s cooperation with the Department of Justice restrict Volkswagen´s ability to comment further on necessarily tentative results of the continuing investigation.”
In the U.S. where a pending resolution for owners of illegal VW cars with dirty diesels is sealed under court order, the company said: “Volkswagen is committed to earning back the trust of its customers, dealers, regulators and the American public. These agreements in principle are an important step on the road to making things right. As noted today in court, customers in the United States do not need to take any action at this time.”
The official German response to this complicated tangle is nothing more than “cover your butt legalese” follows. Beware that this a multi-aspect “plea bargain” – details unknown – that could fall apart with severe judicial – multiple criminal and /or civil actions – with consequently enormous negative financial implications. Moreover, the deals are also sure to be controversial, possibly subject to further litigation and liabilities.
Herewith the VW lawyer language: “In connection with the diesel issue, Volkswagen AG confirms that an agreement in principle with the Department of Justice (Environmental Division), the Environment Protection Agency (EPA), and the California Air Resources Board (CARB), with the full involvement of the Federal Trade Commission (FTC), has been reached in the United States,” VW Group said. “This agreement in principle will be incorporated into binding consent decrees by the Department of Justice and the FTC in the coming weeks.
“Furthermore, Volkswagen has reached an agreement on the basic features of a settlement with the class action plaintiffs in the lawsuit in San Francisco. This agreement will be incorporated into a comprehensive settlement in the coming weeks… he arrangements in the making in the United States will have no legal bearing on proceedings outside of the United States.”
A catcher who wore #8 from a New York championship team that didn’t cheat should have the last word on this as it now stands: “It ain’t over till it’s over.”
