Volkswagen could pose bigger threat to German economy than Greek crisis

Wed Sep 23, 2015 7:16pm EDT
 
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By Michael Nienaber

BERLIN (Reuters) - The Volkswagen (VOWG_p.DE: Quote) emissions scandal has rocked Germany's business and political establishment and analysts warn the crisis at the car maker could develop into the biggest threat to Europe's largest economy.

Volkswagen is the biggest of Germany's car makers and one of the country's largest employers, with more than 270,000 jobs in its home country and even more working for suppliers.

Volkswagen Chief Executive Martin Winterkorn paid the price for the scandal over rigged emissions tests when he resigned on Wednesday and economists are now assessing its impact on a previously healthy economy.

"All of a sudden, Volkswagen has become a bigger downside risk for the German economy than the Greek debt crisis," ING chief economist Carsten Brzeski told Reuters.

"If Volkswagen's sales were to plunge in North America in the coming months, this would not only have an impact on the company, but on the German economy as a whole," he added.

Volkswagen sold nearly 600,000 cars in the United States last year, around 6 percent of its 9.5 million global sales.

The U.S. Environmental Protection Agency said the company could face penalties of up to $18 billion, more than its entire operating profit for last year.

Although such a fine would be more than covered by the 21 billion euros ($24 billion) the company now holds in cash, the scandal has raised fears of major job cuts.   Continued...

 
German Chancellor Angela Merkel sits in a Volkswagen eco-up! auto during a visit to the Volkswagen exhibition at the International Motor Show (IAA) in Frankfurt September 15, 2011.   REUTERS/Alex Domanski