VW shares were down almost 17 per cent on Tuesday in Frankfurt, after losing 19 per cent on Monday Marko Cerovac
Volkswagen AG, the world's largest car maker by sales, has set aside billions of euros for legal costs after this week admitting it sold cars designed to trick emissions tests. Michael Horn, the car-maker's US CEO, said: 'We have totally screwed up'.
Higher actual fine
'Volkswagen plans to set aside a provision of some €6.5bn recognized in the profit and loss statement in the third quarter of the current fiscal year,' the German auto giant said in a stock exchange filing on 22 September. But as VW tacitly acknowledges in the statement, the actual fine could be far higher: 'Due to the ongoing investigations the amounts estimated may be subject to revaluation'. Bloomberg News estimates the fines by the US authorities could be as high as US$18bn, a figure greater than the firm's annual pre-tax profits, which stood at €7.6bn for the first six months of 2015.
Along with an Environmental Protection Agency probe, it has now emerged that the US Department of Justice is to launch its own investigation into VW's manipulation of the emissions testing process. Up to 11 million diesel cars are understood to be set for recall following the revelations, with German industry leaders warning the scandal could wreck the company's reputation for trustworthiness. 'The damage is not only to VW’s image in the US, but globally, this means jobs at VW and many of its suppliers in Germany will be at risk', said Marcel Fratzscher, president of the German Institute for Economic Research.
'I personally am deeply sorry that we have broken the trust of our customers and the public,' said Martin Winterkorn, the VW CEO. 'We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case.' Sources: VW Group; BBC News; Reuters