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VW takes $18B hit as German manufacturers face recall

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Last September U.S environmental agencies speculated that Volkswagen was falsifying emissions tests and U.S courts pursued allegations that brought the scandal to the forefront of worldwide news. Volkswagen was found guilty of installing software that hindered emissions controls when cars were not being tested and U.S federal courts mandated that VW recalled nearly 500,000 cars sold in the U.S. It is estimated over 11 million cars worldwide are affected by the software. Volkswagen just published their annual financial report, amounting to a loss of around $6.2 billion after $16.2 billion in penalties and recalls.

The Volkswagen scandal has brought to light questions about other German manufactures as five German brands, Mercedes, Opel and VW and its subsidiaries Audi and Porsche, have agreed to recall 630,000 more diesel vehicles. While the emissions technology is legal, the temperatures at which emissions systems were throttled does not appear to be legal in all cases.

Going forward, all engine protection features will have to be explained by manufacturers before approved by German authorities. At the same time, companies across the globe are beginning to face speculation as FIAT is now being investigated under similar claims. It is apparent that Volkswagen’s mishap will spiral into stricter engine regulations and broader investigations across the industry.

One Comment

  1. So before the “hit” VW was quite profitable? I assume not all the costs were booked at once, so $16.2 billion in charges and a $6.2 billion loss implies profits of $10.0 billion. But is the $18 billion total realistic? As far as I can tell, this is primarily for the US.

    In the background is a setup in Europe, as detailed by Thomas Klier, that begs for firms to game the system. But what may fly … er, roll? … in Europe isn’t acceptable in the US.

    May 7, 2016

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