Volkswagen is taking another €2.5 billion charge to fix diesel engines in the US, lifting the total bill for its emissions test cheating scandal to around €25 billion.
Shares in the German carmaker fell as much as three per cent yesterday, as traders and analysts expressed dismay the company was still booking charges two years after the scandal broke.
“This is yet another unexpected and unwelcome announcement from VW, not only from an earnings and cash flow perspective but also with respect to the credibility of management,” said Evercore ISI analyst Arndt Ellinghorst.
Europe’s biggest automaker admitted in September 2015 it had used illegal software to cheat US diesel emissions tests, sparking the biggest business crisis in its 80-year history. Before yesterday, it had set aside €22.6 billion to cover costs such as fines and vehicle refits.
Yesterday, it said hardware fixes were proving tougher than expected, as it booked an additional €2.5 billion provision.
“We have to do more with the hardware,” a VW spokesman said, adding US customers were having to wait longer for their cars to be repaired.
The news relates to the programme to buy back or fix up to 475,000 two-litre diesel cars.
In Europe, where only a software update is required for the 8.5 million affected cars, besides a minor component integration for about three million of those, fixes are running smoothly, the spokesman added.
The additional provision will be reflected in third-quarter results due on October 27, VW said.
Ellinghorst, who has an “outperform” rating on VW shares, expects the company to report third-quarter group earnings before tax and interest of €4.04 billion.
“You have to ask if this is a bottomless pit,” said one Frankfurt-based trader of the US charges.
At 1040 GMT, VW shares were down 1.8 per cent at €135.85. They fell as low as €86.36 in the immediate aftermath of the cheating revelations, and are still trading below pre-scandal levels at over €160.
Asked why VW did not see the problem sooner, the spokesman said it had made provisions based on what it expected at the time.
“It has now become clear that we need to do more,” he said.
VW said in September 2015 that around 11 million vehicles worldwide could be fitted with software capable of cheating emissions tests. Porsche SE, which owns a 30.8 per cent stake in VW, said the new provision would also affect its results, but stuck to the wide range for its expected 2017 post-tax profit of €2.1-€3.1 billion. Munich prosecutors have arrested a former board member of Porsche in connection with the emissions scandal at VW’s premium brand Audi, a person familiar with the matter said on Thursday.
Audi admitted in November 2015, two months after parent VW’s emissions scandal broke, that its three-litre V6 diesel engines were fitted with an auxiliary control device deemed illegal in the US.