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Emission Scandal Costs $18 Billion for Volkswagen

Emission Scandal Costs $18 Billion for Volkswagen
Volkswagen (VW) said on Friday that it would slash its dividend to help pay for its emissions-test cheating scandal and take a 16.2-billion-euro ($18.2 billion) hit to its 2015 results.
With Germany-based automakers including Mercedes-Benz, and Opel - as well as VW - agreeing to recall a total of 630,000 cars to fix diesel engine technology blamed for high pollution, the news came amid growing signs a regulatory clampdown in the wake of VW's cheating is affecting the broader industry.
On Thursday, VW agreed to set up environmental and consumer compensation funds and make up a framework settlement with U.S. authorities to buy back or potentially fix about half a million cars fitted with illegal test-fixing software.

Analysts said the deal was crucial for VW to provide a starting point for Europe's biggest carmaker to try to rebuild trust with investors and customers and give a cost for the scandal in its 2015 results, which have been delayed since February.
VW would be driven to a 2015 net loss of 1.36 billion euros, the largest in its history and the first on an annual basis since 1993 due to the money it was setting aside to pay for the scandal, the company said.
Full results are due on April 28.
But analysts said that the Wolfsburg-based company could still face a DoJ investigation that could lead to criminal charges and further costs, including potential U.S. Department of Justice (DoJ) fines as part of an expected civil settlement.
There are also questions about who will be blamed for the scandal in several ongoing investigations and whether it will offer compensation to the much larger number of diesel drivers affected outside the United States.
"The crisis in Wolfsburg is far from over yet. The agreement with U.S. regulators is nothing but an intermediate step in a marathon that should stretch out over the next 5-10 years," said NordLB analyst Frank Schwope, who has a "hold" rating on VW stock.
VW said on Friday that until it had reached an agreement with the DoJ, it could not release preliminary findings from an investigation it commissioned from U.S. law firm Jones Day.
Chief Executive Matthias Mueller also said there was no reason to believe the 2015 loss would lead to job cuts even though he could not put a figure on the total cost of the scandal -- which some analysts have estimated at about $30 billion.
Down from 4.80 and 4.86 respectively the year before, a dividend of 0.11 euros per ordinary share and 0.17 euros per preferred share on its 2015 results is being planned to be paid by VW.
There would be an average fall of 39 percent from the year before for executive bonuses, the company said.
With VW's second-largest shareholder - its home state of Lower Saxony - calling for management bonuses to be scrapped or significantly reduced, they have been a major flashpoint with workers and some investors.

Christopher J. Mitchell

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