Volkswagen November Sales Tank 25%; S&P Cuts Rating

After dropping just a fraction of a point in October, following the revelation of the company’s attempts to defeat emissions testing on its diesel-fueled cars, Volkswagen sales dropped 24.7% in November. Year to date, sales are down 4.3%.

And in a related development, Standard & Poor’s Tuesday downgraded VW debt from A- to BBB+, a one-notch drop and still safely an investment grade rating. S&P also dropped its outlook for the company to Negative. Here’s part of the ratings firm’s report:

The negative outlook reflects the possibility that we may lower the long-term corporate credit rating on VW by one notch within the next one-to-two years. This could occur if leverage metrics remained weakened in 2016 and on a sustainable basis, with adjusted funds from operations to debt below 45% or adjusted debt to EBITDA above 2x, for example if VW incurs substantial fines or litigation damages without taking sufficient offsetting measures.

Here’s what VW had to say about sales in Tuesday’s announcement:

The November sales results reflect the impact of the recent stop-sale for all 2.0L 4-cylinder TDI vehicles as well as for the 3.0L V6. The voluntary stop-sales were issued in light of notices received by the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) regarding emissions compliance.

Although U.S. sales of diesel-powered passenger vehicles is quite limited, the blowback from VW’s cheating scandal has hit most of the company’s other models. The new 2016 Passat hit dealer showrooms in November and sold just 2,759 units, down from 6,966 units sold in November of last year, a drop of about 60%. The popular Jetta Sedan saw sales fall nearly 23% from 14,268 a year ago to 11,201, and sales of the Golf fell 64% from 2,149 to 774.

Interestingly, sales of the all-electric e-Golf rose nearly 300%, from 119 a year ago to 472 this year. That’s not enough to turn VW around, obviously, but it was enough to boost total sales of the Golf brand to a 2.9% year-over-year sales gain, from 3,993 a year ago to 4,110 this year.

Regarding the diesel emissions scandal, VW’s chief operating officer for the U.S. said:

Volkswagen is working tirelessly on an approved remedy for the affected TDI vehicles. During this time we would like to thank our dealers and customers for their continued patience and loyalty.

The company is reported to be near receiving European regulatory approval for a fix to the rigged diesel vehicles. According to Automotive News, the company is proposing a software-only fix for affected 1.2- and 2.0-liter engines and adding an air filter to the 1.6-liter version.

That may be enough to satisfy regulators, but it is unlikely to be enough to satisfy customers who more than likely will face diminished performance in their diesel-powered cars. VW of America has offered to pay owners $1,000 as a good-will gesture, but it has made no such offer to European customers.

VW had sold around 65,000 diesel vehicles in the United States this year before withdrawing the cars from sale. The company has sold an estimated 11 million vehicles with the deceptive engine and only about 500,000 of those in the United States.

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