S&P Lowers Volkswagen Credit Rating

The hits for Volkswagen seem to keep on coming. The latest setback for the automaker during their diesel emissions crisis is a downgraded credit rating.

Standard and Poor just lowered the credit rating for Volkswagen from A to A-. The new lower rating comes amid the VW diesel emissions crisis that some analysts feel could end up deeply harming the company bottom line. According to MarketWatch, the S&P is also keeping the Volkswagen on a CreditWatch negative. Reports indicate the credit rating for VW could continue to tumble if the outlook for VW continues to appear less than ideal.

In a statement, Alex Herbert, Analyst for S&P spoke about the VW rating saying, “VW has demonstrated material deficiencies in its management and governance and general risk-management framework. VW’s internal controls have been shown to be inadequate in preventing or identifying alleged illegal behavior” and the potential for other violations “represents a significant reputational and financial risk.”

Since the news of the VW scandal broke back on September 18, Volkswagen has lost about $20 billion of market value as their stock has declined. With rumors also flying nearly from the first day of the crisis that the EPA will fine VW $18 billion, its possible that the German-based automaker is going to take major financial hits in 2015 and into 2016. Volkswagen is going to try to save some money by limiting spending this year by $1.1 billion.

Where is the low point of this scandal for VW? At what point will VW began to trend back upward on their balance sheet and in the minds of consumers and dealers? How low do you think that the credit rating for Volkswagen will fall before it recovers? The automaker has offered consumers a $2,000 incentive to purchase a new vehicle. Is that amount enough, and if not, how much should they offer?