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VW, Setting Aside $18 Billion for Diesel Scandal Costs, Reports Record Loss VW, Setting Aside $18 Billion for Diesel Scandal Costs, Reports Record Loss
(about 1 hour later)
FRANKFURT — Volkswagen reported a record loss for 2015 on Friday, as it set aside more than $18 billion to cover the cost of fines, legal claims and recalls in the United States and other countries related to diesel emissions cheating. FRANKFURT — Volkswagen reported a record loss for 2015 on Friday as it set aside more than $18 billion to cover the cost of fines, legal claims and recalls in the United States and other countries related to diesel emissions cheating.
Volkswagen said it had lost 5.5 billion euros, or more than $6.2 billion, last year, compared with a profit of €2.5 billion in 2014. The figures show that the scandal will cost the company more than it previously acknowledged. But the sum was also less than some estimates for the cost of the United States settlement, which ranged as high as $30 billion.
The company increased the amount of money it was setting aside for the scandal, to €16.2 billion. That was up from €6.7 billion previously. Volkswagen said it lost 5.5 billion euros, or more than $6.2 billion, last year, compared with a profit of €2.5 billion in 2014.
There were also indications on Friday that questions about diesel engines was spreading to other carmakers. The company increased the amount of money it was setting aside for the scandal to €16.2 billion. That was up from €6.7 billion previously.
Daimler, the maker of Mercedes cars, disclosed early Friday that it was under investigation by the United States Department of Justice in connection with emissions testing. On Thursday, French authorities investigating potential auto emissions anomalies gathered documents from the offices of PSA Group, the parent of Peugeot and Citroën. PSA said it was cooperating with the investigation. The crisis “is having a huge impact on Volkswagen’s financial position,” Matthias Müller, the chief executive, said in a statement. The company warned that sales this year could fall 5 percent, from €213 billion in 2015, because of declining global demand for cars and the emissions scandal.
Volkswagen, after a meeting on Friday of its supervisory board in Wolfsburg, Germany, where the company has its headquarters, also said it would delay the publication of a widely anticipated internal investigation of how the diesel cheating came about. Instead of releasing the information in April as promised, the company will wait at least until it works out a settlement with the Department of Justice. There were also indications on Friday that controversy about diesel engines was spreading to other carmakers.
Volkswagen has admitted that its employees programmed 11 million cars so that pollution controls operated at full capacity only when the vehicles were being tested. But seven months after the illegal emissions manipulation came to light, the company has not clarified who was responsible for the wrongdoing and whether any top managers were involved. The German Transport Ministry said it was ordering the recall of 630,000 diesel cars because they were programmed to turn down emissions controls in cold weather. However, the ministry said that except for Volkswagen, none of the companies had illegal software designed to produce artificially low emissions under test conditions. The brands whose vehicles are subject to recall include Mercedes-Benz, General Motors’ Opel unit, Volkswagen, Audi and Porsche.
The law firm Jones Day has been poring through documents and computer files and interviewing employees, but it has not yet issued its conclusions. The law firm declined to comment. Daimler, the maker of Mercedes vehicles, disclosed early Friday that it was under investigation by the United States Justice Department in connection with emissions testing. On Thursday, French authorities investigating potential auto emissions anomalies gathered documents from the offices of the PSA Group, the parent of Peugeot and Citroën. PSA said it was cooperating with the investigation.
Volkswagen’s financial disclosure on Friday, in a preliminary earnings report, came a day after the company agreed on the outlines of a plan to settle some legal claims in the United States, which would include giving owners of about 500,000 affected vehicles the option of selling the cars back to the company or of having them repaired. Volkswagen, after a meeting on Friday of its supervisory board in Wolfsburg, Germany, where the company has its headquarters, also said it would delay the publication of a widely anticipated internal investigation of how the diesel cheating came about. Instead of releasing the information in April as promised, the company will wait at least until it works out a settlement with the Justice Department.
Volkswagen is still negotiating the size of the fines it will pay to the United States government for violations of clean air laws, as well as how much additional compensation it will provide to owners. The money set aside by the company on Friday provides an indication of what Volkswagen expects the total global costs of the scandal to be, although the figure could rise further. Volkswagen said it was acting on the advice of its lawyers. A disclosure would “significantly impair Volkswagen’s cooperation with the Department of Justice and weaken Volkswagen’s position in any remaining proceedings,” the company said in a statement.
Volkswagen has admitted that its employees programmed 11 million cars so that pollution controls operated at full capacity only when the vehicles were being tested. But seven months after the illegal emissions manipulation came to light, the company has not clarified who was responsible for the wrongdoing and whether top managers were involved.
The law firm Jones Day has been poring through documents and computer files and interviewing employees, but it has not issued its conclusions. The law firm declined to comment.
Volkswagen’s financial disclosure on Friday, in a preliminary earnings report, came a day after the company agreed on the outlines of a plan to settle some legal claims in the United States, which would include giving owners of about 500,000 affected vehicles the option of selling the cars back to the company or having them repaired.
Volkswagen is still negotiating the size of the fines it will pay to the United States government for violations of clean-air laws, as well as how much additional compensation it will provide to owners. The money set aside by the company on Friday provides an indication of what Volkswagen expects the total global costs of the scandal to be, although the figure could rise further.
Volkswagen had delayed reporting its annual earnings because of uncertainty about the size of the financial damage.Volkswagen had delayed reporting its annual earnings because of uncertainty about the size of the financial damage.
The wrongdoing by Volkswagen has also led to increased scrutiny of other carmakers.The wrongdoing by Volkswagen has also led to increased scrutiny of other carmakers.
Daimler, based in Stuttgart, disclosed early Friday that it was conducting an internal investigation at the request of the Justice Department into the procedures it uses to certify exhaust emissions. The recall announced on Friday in Berlin is one result of an investigation carried out by the German Transportation Ministry after American authorities found Volkswagen to be cheating on emissions tests in the United States.
Jörg Howe, a spokesman for Daimler, said that the company was cooperating with American authorities, but he declined to comment further. Alexander Dobrindt, Germany’s minister of transport, said Friday that the investigation did not reveal any vehicles equipped with illegal software, other than some of the Volkswagens in the group that were already known to have the ability to cheat on emissions tests.
Scaling back the emissions controls was allowed under certain conditions, he said, to protect, for example, the motor from damage. But investigators were not convinced the switches in the cars being recalled met the legal requirements to be permissible, Mr. Dobrindt said. The automakers will be required to improve the emissions performance of the vehicles.
Automakers have an incentive to avoid running the emissions equipment at full power, to minimize wear or to minimize consumption of the urea solution used in some models to neutralize nitrogen oxides.
Daimler, based in Stuttgart, disclosed early Friday that it was conducting an internal investigation at the request of the United States Justice Department into the procedures it uses to certify exhaust emissions.
Jörg Howe, a spokesman for Daimler, said the company was cooperating with American authorities but declined to comment further.
The potential for Daimler’s Mercedes unit to become embroiled in a scandal of the same scope as Volkswagen is probably limited because it sells relatively few diesel vehicles in the United States.The potential for Daimler’s Mercedes unit to become embroiled in a scandal of the same scope as Volkswagen is probably limited because it sells relatively few diesel vehicles in the United States.
Cars with diesel engines accounted for less than 3 percent of the 340,000 passenger cars that Mercedes sold in the United States last year. Cars with diesel engines accounted for less than 3 percent of the 340,000 passenger vehicles that Mercedes sold in the United States last year.
Volkswagen, though, promoted so-called clean diesel heavily in an attempt to win environmentally conscious buyers. Vehicles with diesel engines accounted for more 23 percent of the Volkswagen brand cars sold in the United States in August 2015, a month before the emissions cheating came to light. Volkswagen, though, promoted so-called clean diesel heavily in an attempt to win environmentally conscious buyers. Vehicles with diesel engines accounted for more than 23 percent of the Volkswagen brand cars sold in the United States in August 2015, a month before the emissions cheating came to light.
Until last year, the biggest annual loss reported by Volkswagen was 1.9 billion deutsche marks in 1993, or about $1.2 billion at the time. A sales crisis caused by a recession in Europe paved the way for Ferdinand Piëch to become chief executive of Volkswagen, which was founded by his grandfather, Ferdinand Porsche.
Mr. Pïëch, who was chairman of the Volkswagen supervisory board until last year, revived the company and helped make it the dominant carmaker in Europe. But he has also been accused of creating a climate of fear that prevented subordinates from openly discussing problems, which may have led them to cheat on emissions.