Volkswagen takes $18 billion hit over emissions scandal

Fri Apr 22, 2016 12:29pm EDT
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By Andreas Cremer and Edward Taylor

WOLFSBURG/FRANKFURT (Reuters) - Volkswagen (VW) said on Friday it would take a 16.2-billion-euro ($18.2 billion) hit to its 2015 results and slash its dividend to help pay for its emissions-test cheating scandal.

The news came amid growing signs a regulatory clampdown in the wake of VW's (VOWG_p.DE: Quote) cheating is affecting the broader industry, with Germany-based automakers including Mercedes-Benz, and Opel - as well as VW - agreeing to recall a total of 630,000 cars to fix diesel engine technology blamed for high pollution.

On Thursday, VW agreed a framework settlement with U.S. authorities to buy back or potentially fix about half a million cars fitted with illegal test-fixing software, and set up environmental and consumer compensation funds.

Analysts said the deal was crucial for VW to give a cost for the scandal in its 2015 results, which have been delayed since February, and provide a starting point for Europe's biggest carmaker to try to rebuild trust with investors and customers.

VW said on Friday the money it was setting aside to pay for the scandal would drive it to a 2015 net loss of 1.36 billion euros, the largest in its history and the first on an annual basis since 1993. Full results are due on April 28.

However, analysts said the Wolfsburg-based company could still face further costs, including potential U.S. Department of Justice (DoJ) fines as part of an expected civil settlement, and a DoJ investigation that could lead to criminal charges

There are also questions over whether it will offer compensation to the much larger number of diesel drivers affected outside the United States, as well as who will be blamed for the scandal in several ongoing investigations.

"The crisis in Wolfsburg is far from over yet," said NordLB analyst Frank Schwope, who has a "hold" rating on VW stock.   Continued...

New cars of several brands of German carmaker Volkswagen AG are covered with protective covers before they are loaded for export on a transport ship at the harbour of the Volkswagen plant in Emden, Germany, April 24, 2009.     REUTERS/Christian Charisius/File photo