The emissions scandal choking Volkswagen just keeps getting worse. Last year, VW earmarked €6.7bn to cover costs after it was caught fitting "defeat" devices to millions of vehicles, allowing the cars to falsely pass emissions tests. But after a board meeting this month, that figure has more than doubled to €16bn ($18bn).
VW is yet to release a detailed report into the scandal by Jones Day, a US law firm, but the impairment has pushed the firm to its biggest loss since it was founded in 1937. Its dividend has been slashed by 98%, its chief executive ousted, sales are due to fall 5% this year, and executives face possible criminal charges.
At least this gives clarity, says Barclays' Kristina Church. It encompasses "all known" costs, including fixing cars, buying back vehicles and paying fines and legal bills. In the US, VW plans to buy back 480,000 vehicles, offering $5,000 to customers who'd rather keep them. "But it is unclear what remains unknown," Church says. Other carmakers are being sucked into the scandal.
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Last week, Mitsubishi and Nissan admitted that their employees have falsified test conditions for several models over several years, skewing claimed emissions lower and exaggerating fuel efficiency.
Peugeot, which also owns Citroen, had its office in Paris raided last week; Renault was raided in January, feeding the suspicion that VW's misdemeanours are not one-offs. Germany's Daimler, which owns Mercedes, is "next in the firing line", says Joe Rundle of ETX Capital. It has opened an investigation into "irregularities" in its engines, at the behest of the US Department of Justice. Some Opels have also been recalled, dragging Detroit-based General Motors into the furore.
For carmakers, trust in the brand is everything, says Peter Campbell in the Financial Times. These scandals will tighten regulatory standards and the timing could hardly be better for Apple and Google's parent company Alphabet, as both firms advance driverless car technology.
Elon Musk, chief executive of electric car pioneer Tesla, is also making the most of a crisis, calling on regulators to insist that VW transitions to "zero emissions". Dirty cars should be crushed, not tweaked, he says. Tesla is going from being merely successful to being "disruptive", say analysts at Goldman Sachs, and its share price has nearly doubled in the last two months.
By Vaishali Varu Published
By Ruth Emery Published