Volkswagen posts first loss in 15 years after diesel scandal

Scandal-hit German auto giant Volkswagen AG reported yesterday its first quarterly loss in 15 years after keeping  a €6.7-billion provision for liabilities related to the emission cheating in its diesel engines.

The company suffered an operating loss of €3.5 in the third quarter, compared with a €3.2-billion profit a year ago. For the nine months up to September, the loss was €3.3 billion, a 64-per cent dive from €9.4 billion last year. The figures were broadly in line with what the market expected.

Nevertheless, the automaker was able to push its sales revenue up by 5.4 per cent at 51.5 billion from 48.9 billion in the September quarter. For the three quarters, sales were up 8.5 per cent at 160.3 billion from 147.7 billion last year.

The auto giant has revised downward its profit forecast for the full year on account of the scandal which erupted last month, after US officials found the company had fitted 'defeat software' in millions of diesel engines to fool emission tests.

This year's operating profit is expected to be well below the €12.7 billion achieved last year.

''We expect 2015 operating profit for both the group and the passenger cars business area to be down significantly year-on-year,'' the company said.

Volkswagen CEO Matthias Müller said, ''We will do everything in our power to win back the trust we have lost.''

The company took a charge of €6.7-billion for recalls and fixing of the affected 11 million vehicles. Analysts believe the final bill could be several times more on account of fines and class action lawsuits across the world.

According to the company's chief financial officer, Frank Witter, the liability is ''enormous but manageable''.

''We are leaving no stone unturned to find out what exactly happened and to make sure nothing like this ever happens again,'' Mueller told analysts and investors, before leaving for China along with German chancellor Angela Merkel.

Following the announcement of the dismal quarterly figures, the chief presented a five-point plan saying that ''Volkswagen will emerge from the current situation stronger than before.''

The company's priorities will include providing support to the affected customers and a thorough investigation of what happened. Volkswagen has hired professional services of Deloitte to help in the probe.

Besides, the group will resort to restructuring and decentralisation including review its current portfolio of over 300 models, and create a new culture and cooperation within the organization.

Müller said the company will unveil its new strategy 2025, cornerstones of which will be announced mid-next year.

According to Müller, the point is not to sell 100,000 more or fewer vehicles than a major competitor. Instead, the real issue is qualitative growth.

Investors shrugged off the results and Volkswagen stock surged 4 per cent yesterday on the German stock exchange.

The German company, which has lost its credibility due to the scandal, yesterday lost its position as the world's biggest car maker in the third quarter to Japanese auto giant Toyota Inc.

Toyota sold 7.49 million cars during January-September against Volkswagen's 7.43 million. (See: Dieselgate-hit Volkswagen falls as world's biggest carmaker)