Volkswagen Adds Big to Reserves for Emissions Scandal

By Paul Ausick Updated Jan 13, 10:25AM EST · Published Apr 22, 11:55AM EDT

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Volkswagen Adds Big to Reserves for Emissions Scandal — © courtesy of Volkswagen AG

On Thursday Volkswagen presented a plan to resolve complaints related to VW’s emissions cheating scandal to a U.S. federal district court judge in San Francisco. Details of the plan were not revealed but are said to include car buybacks, repairs and owner compensation. Earlier this week, Reuters reported on some aspects of VW’s plan.

Friday morning, the company reported fiscal year 2015 results that were not bad operationally, but included a €16.2 billion provision for costs the company expects to face related to the diesel emissions scandal. Volkswagen already has paid out €6.7 billion for installing a software defeat device in about 11 million vehicles (about 600,000 in the United States) that could determine if the car was being tested for emissions and lower its nitrogen-oxide emissions if testing was going on. Under normal driving conditions, emissions rose to a level of as much as 40-times allowable limits.

Excluding the provision for losses, operating profit rose slightly year over year at €12.8 billion. Consolidated revenues rose 5.4% to €213.3 billion.
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Chairman Matthias Müller said:

The Volkswagen Group’s operations are in great shape, as the figures before special items for the past fiscal year clearly show. Were it not for the sizable provisions we made for all repercussions of the emissions issue that are now quantifiable, we would be reporting on yet another successful year overall. The current crisis – as the figures presented today also reveal – is having a huge impact on Volkswagen’s financial position. Yet we have the firm intention and the means to handle the difficult situation we are in using our own resources.

VW is probably under no illusion that the €16.2 billion it has just set aside will be enough to pay for all the fines and claims that are piling up. What it can hope to do is continue operating and making enough revenue to pay the claims as they come due. Clearly the company’s management thinks that it can do so. But then, what other choice does it have?

About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.