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Analysts Say Volkswagen To Benefit From Appointment Of New CEO

Analysts Say Volkswagen To Benefit From Appointment Of New CEO
According to market experts and analysts, Volkswagen could ultimately be set free from the troubles it has been facing since the "dieselgate" scandal because of the new plans by the German auto maker.
A number of changes were announced by the company on Thursday. The changes include the reorganization off the group into six businesses along with a fresh portfolio for China. the company also announced the appointment of Herbet Diess as the new CEO starting in August who would be replacing Matthias Muller who was the leader of the company in the wake of the diesel emissions scandal.
The car maker has been facing trouble since 2015 when the first news of the diesel emission scandal in which there are allegations that the company had deliberately used a software to show low emission levels in its diesel cars in the U.S. The result of the scandal was a mammoth $2.8 billion fine imposed by the U.S. authorities.
Diess had been heading the car division of the company.
"Volkswagen used to trade at a big, big discount, and I think Herbert Diess is really the CEO who will drive efficiency at Volkswagen, he will take the company to the next level," Arndt Ellinghorst, senior managing director at Evercore ISI, told said in a television interview.
"Investors will really enjoy meeting him and will put a lot of trust into his ambitions into Volkswagen," he added.
There was a fall of 40 per cent in the share price of Volkswagen in September 2015 after the news of the diesel scandal. However, since then the share values of the company have recovered by 92 percent and are now trading at a 8 per cent hike over the price at the time just before the scandal.
For the entire 2017, a 4.3 per cent year-on-year increase in sale was reported by the company. the company also owns brands like Audi and Porsche.
There has bene criticism against the company to not being able to change itself fast enough, says Anna-Marie Baisden, head of autos research at BMI Research. She said that there are "too many layers of control to make any decisions because of the big family shareholdings."
She however added that the company has taken a good strategy to appoint Diess. "While not a total outsider he is relatively new to the company and so brings a new outlook," Baisden said.
While not indulging in mass job cuts, Diess carries a reputation of being able to cuts costs significantly., she said. and additionally, according to Baisden, Diess is also "very forward looking" and acknowledges and prepares for new market competition from companies such as Tesla instead of only focusing on the traditional rivals in the auto industry.
There has been a slight sight increase in the share price of the company following the announcement.
There is expectation that Volkswagen would be able to beat v and further increase its financial guidance later this year, say UBS analysts. "Diess might revisit the 2020 business plan later this year ... We think his strong track record at the VW brand so far and previously at BMW could well result in more ambitious targets, and several brands are still well below potential in terms of profitability," the analysts said in a research note Friday.

Christopher J. Mitchell

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