Volkswagen’s ‘Dieselgate’ provisions turn profit to loss

Volkswagen has reported quarterly losses for the first time in 15 years in the wake of the dieselgate emissions scam, with a €2.52bn loss in  the third quarter of 2015.

The VW Defeat Device scandal may have been causing Volkswagen much grief for the last month, but the financial pain is only just starting to hit.

The first evidence of VW’s financial pain comes with their first reported loss in 15 years – €2.52bh in the third quarter of 2015 – caused entirely by €6.7bn (£4.8bn) set aside to cover fixing some 11 million cars in the UK, Europe, the US and other parts of the world, which are going to need either a software fix or physical changes to their emissions controls. Which works out at under £500 per car.

Looking at the bigger picture, the provisions VW has made for fixing the cars affected is just the tip of the iceberg – much bigger costs are going to be hitting VW in the coming year.

VW admit that they have so far made no provisions for criminal and civil charges from regulators, or for individual (or class action) lawsuits from customers and investors, a liability that could see VW facing additional costs of anything from €20-100bn.

But it would seem VW isn’t seeing any major fall in new car sales on the back of the Dieselgate crisis, and despite a small fall in sales in the third quarter of 2015 (sales down 3.7 per cent to the end of September), VW are still predicting sales 4 per cent up for 2015. And they’re probably right.

When Toyota’s ‘sticky throttle’ crisis engulfed the Japanese company a few years ago, many predicted it would decimate sales and cause the company long-term damage. But although Toyota did suffer some short-term sales pain, it bounced back and has now grabbed the title of the world’s biggest car maker – from VW.