Volkswagen Fills Its Scandal Jar With $18.2 Billion, Warns of Financial Pain Ahead
The heavy financial cost of Volkswagen’s diesel emissions scandal is becoming clear.
After reaching a settlement yesterday with U.S. consumers and regulators, the automaker is more than doubling the size of its “make the problem go away” cash pile, Bloomberg is reporting.
Volkswagen set aside 16.2 billion euros ($18.6 billion) today to deal with the scandal’s fallout, up from the 6.7 billion euro ($7.6 billion) figure previously stated.
Though Volkswagen TDI owners in the U.S. are likely pleased to see action on the compensation front, VW shareholders won’t like this news one bit. To free up the cash, the automaker cut its annual dividend by 97 percent. Expect plenty of empty stockings in Wolfsburg this Christmas.
Volkswagen CEO Matthias Mueller put on a grim tone, explaining in a statement, “The current crisis — as the figures presented today reveal — is having a huge impact on Volkswagen’s financial position.”
The financial hit goes beyond shareholders, with the company’s management board now facing years of reduced pay.
“As a result of the current performance figures, which are poorer, there will be a reduction in the variable remuneration covering several years and also in the individual performance-related bonus component,” Volkswagen AG said in a media release. “This effect will also be felt over the next few years.”
The amount of variable remuneration paid to board members for the 2015 fiscal year will be 57 percent lower than the previous year.
After a lengthy delay, Volkswagen will release its 2015 earnings report on April 28. First-quarter earnings from 2016 will see the light of day on May 31.
Amid all the spending on recalls and buybacks, not to mention the various fines and lawsuits, Volkswagen predicts flat sales and a five percent revenue drop for this year. Later this year, sometime in the fourth quarter, the results of an internal investigation by law firm Jones Day will land on the automaker’s plate.
[Image: Volkswagen of America]
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One gets the feeling as though VW's getting "piled-on." (and this is from no fan of Volkswagen, either). It's the song that seemingly never ends.
Well, it's not as if VAG management has failed to ask for it. Mueller's NPR interview debacle has to taken as emblematic of how the problem has been handled to date. This, I might add, coming from a VW owner who will probably flee not because they did it in the first place, but because they compounded the problem so creatively.