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Photo: AFP
Photo: AFP

Volkswagen takes $18 billion hit over emissions scandal

Volkswagen says the money it was setting aside to pay for the scandal would drive it to a 2015 operating loss of 4.1 billion euros

Wolfsburg/Frankfurt: Volkswagen (VW) said on Friday it would take a 16.2-billion-euro ($18.2 billion) hit to its 2015 results and slash its dividend to help pay for its emissions-test cheating scandal.

The news came amid growing signs a regulatory clampdown in the wake of VW’s cheating is affecting the broader industry, 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.

On Thursday, VW agreed a framework settlement with US authorities to buy back or potentially fix about half a million cars fitted with illegal test-fixing software, and set up environmental and consumer compensation funds.

Analysts said the deal was crucial for VW to give a cost for the scandal in its 2015 results, which have been delayed since February, and provide a starting point for Europe’s biggest carmaker to try to rebuild trust with investors and customers.

VW said on Friday the money it was setting aside to pay for the scandal would drive it to a 2015 operating loss of €4.1 billion. Full results are due on 28 April.

However, analysts said the company could still face further costs, including potential US department of justice (DoJ) fines as part of an expected civil settlement, and a DoJ investigation that could lead to criminal charges

There are also questions over whether it will offer compensation to the much larger number of diesel drivers affected outside the US, as well as who will be blamed for the scandal in several ongoing investigations.

Volkswagen said on Friday it could not release preliminary findings from an investigation it commissioned from US law firm Jones Day until it had reached an agreement with the DoJ. Reuters

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