Volkswagen Planning Capital Push to Raise Money For Scandal

Aaron Cole
by Aaron Cole
volkswagen planning capital push to raise money for scandal

Volkswagen may issue preferred shares to help raise money to deal with its growing diesel scandal, Reuters reported.

The German automaker may cut costs and boost cash flow before resorting to offering parts of the company to outside investors. According to the report, VW may find some willing investors to help bail the company out of its dire straights thanks to its healthy balance sheet and assets. However, if no one is willing to take the bait, the company may resort to more extreme cash-raising strategies that include selling ordinary stock, or even perhaps selling off some of its brands.

Reuters reported that sources said Volkswagen wasn’t considering selling any of its brands now. Fiat Chrysler Automobiles spun off luxury carmaker Ferrari this year, in part, to raise capital for other investments at the global automaker.

“The company has a fairly robust balance sheet — but also has a very conservative approach to financing and its credit rating,” Bernstein analyst Max Warburton said in a statement according to Reuters. “We believe that if the cash costs exceed 10 billion euros, a capital raise is highly likely.”

In the analyst’s note, Warburton said that VW had roughly €17.6 billion in cash on hand already, but it would take about €10 billion in net cash to run day-to-day operations. Volkswagen said it would set aside €6.5 billion to help pay for the scandal.

Already, Volkswagen announced it would cut a shift at one of its engine plants and freeze hiring within its finance department to control costs. It’s unclear what other measures the automaker may take to save cash.

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  • I recommend burnout contests.

    • PeriSoft PeriSoft on Oct 01, 2015

      BTSR, we don't see eye to eye on much, but in this instance I heartily endorse your position.

  • Fordson Fordson on Oct 01, 2015

    More dire "straights," like in the Golf R piece. If you're that fond of the expression, maybe you could learn how to spell it - ? It's a seafaring term - pertains to being in a tight spot (like a strait, for example) and having few ways to extricate oneself.

  • 28-Cars-Later 28-Cars-Later on Oct 01, 2015

    This whole thing is so insane if you think about it.

    • See 17 previous
    • 28-Cars-Later 28-Cars-Later on Oct 02, 2015

      @stuki Nice fracking post sir. The only other point I could hope to make is this citation from that paper the other day: “The market included 2,500 electricity generating units and industrial boilers, although the 700 coal-fired electricity generating units in the market accounted for 95 percent of all NOx emissions in the market (USEPA 2009b).” So as of 2009 every diesel car/truck/train/power generator/tractor trailer goes the market tomorrow to gain a 5% reduction in NOx. Again not to detract from your points, but fixing the VW thing as-is stands to reduce the overall national NOx level very little.

  • Corey Lewis Corey Lewis on Oct 01, 2015

    I can't see where they'd have an issue finding buyers for preferred stock. It's the smarter sort of stock to issue, as it does not give board voting rights.

    • See 2 previous
    • Lorenzo Lorenzo on Oct 01, 2015

      @MarionCobretti Germany? Greece? Bailout? That's it! Karma! VW is taking one in the cojones for the fatherland!