Volkswagen Reports First Quarterly Loss In Over A Decade

Volkswagen reported a $1.83 billion loss in the third quarter as it set aside the necessary funds to pay for recalling and fixing cars that were rigged to evade U.S. diesel emissions tests. While the German automaker warned that its operating profit this year will be “down significantly,” it indicated that sales would prove resilient. The company is keeping to its prediction that unit sales will be on par with last year’s record $11 billion.

Volkswagen had already announced the set-asides for the recalls, so market analysts expected the quarterly loss, the company’s first in more than a decade. However, chief financial officer Frank Witter said the company has “solid and robust” cash resources to meet the financial impact of the massive emissions scandal. The cost “is enormous but manageable,” he said.

Many analysts believe the impact will likely be several times larger than the set-asides, including fines, recall and repair costs, and possible lost sales due to damage to the company’s reputation. The scandal became known near the end of the quarter, September 18, so any impact on quarterly sales was minimal.

“The figures show the core strength of the Volkswagen Group on the one hand, while on the other the initial impact of the current situation is becoming clear,” said the company’s new CEO, Matthias Müller. “We will do everything in our power to win back the trust we have lost.”

In addition to a damaged reputation, Volkswagen also faces possible fines and legal actions stemming from last month’s revelations that the company had for years been using software to cheat emissions tests on its diesel-powered cars. The U.S. Environment Protection Agency says that Volkswagen installed software on 482,000 cars from model years 2009-2015 that disabled diesel engine emission controls when the vehicles were not being tested, with up to 11 million cars worldwide containing the deceptive software.

VW is now working on a method to fix the cars so that they no longer turn off emissions controls during normal driving and activate only during official tests.

Müller says that the company needs to place less emphasis on raw sales numbers and become more open and leaner to help prevent any repeat of the scandal. He indicated VW will rework its Strategy 2018, which set as a goal passing Toyota as the world’s largest automaker. “It’s not about selling 100,000 more or less than a big competitor,” he said. The goal was achieved for several months this year, but was then lost due to the scandal. VW’s CEO explained that some of the goals from the earlier plan, such as profitability and customer satisfaction, are more important now than ever.

At the Tokyo auto show, Herbert Diess, head of the namesake Volkswagen brand, apologized for the emissions-cheating scandal and said that the company will delay the launch of a diesel vehicle in Japan.

“On behalf of my entire company, I’d like to apologize,” said Diess, stressing that the priority is to fix the problem, uncover what happened, and ensure that this type of scandal never occurs again.