BERLIN—Volkswagen AG, the German car maker embroiled in an emissions-cheating crisis, said Wednesday it swung to a €1.73 billion ($1.9 billion) third-quarter net loss and issued a full-year profit warning, as the cost of repairing tainted diesel-powered cars began to slam earnings.

The quarterly loss, Volkswagen's first in more than a decade, compares with a net profit of €2.9 billion a year earlier. The loss was caused by a €6.7 billion charge against earnings that the company has taken to pay for a global recall of up to 11 million cars containing software that allows them to dupe emissions tests.

As the costs of the crisis continue to mount, Volkswagen warned that full-year operating profit for both the group and the passenger cars business will be "down significantly year-on-year." But the company was unable to provide much detail as the final cost of the recall, potential fines from regulators, and lawsuits remain unknown.

"The initial impact of the current situation is becoming clear. We will do everything in our power to win back the trust we have lost," said Chief Executive Matthias Mü ller.

Volkswagen's interim report contained no surprises. It was well received by investors, who pointed to the company's good cash position and a minor increase in provisions to finance the recall. Volkswagen initially earmarked €6.5 billion for it.

"We see it as a positive signal that management has pretty much kept the provision for the diesel scandal unchanged," said Arndt Ellinghorst, automotive analyst at Evercore ISI. "Together with the very strong net liquidity this should reassure both equity and fixed income investors."

Volkswagen shares were trading up more than 3% at about €108 throughout the morning on the Frankfurt Stock Exchange.

The U.S. Environmental Protection Agency disclosed on Sept. 18 that some Volkswagen diesel-powered cars contained software that allowed them to perform better on emissions tests in the lab than during road use.

The company has since admitted to deceiving environmental authorities in the U.S. and Europe and faces regulatory and criminal investigations in several countries as well as shareholder and customer lawsuits.

Filling several pages in its financial report for the third quarter, Volkswagen provided a list of potential risks, including confirmation that it is under investigation by the U.S. Department of Justice. It also cites investigations by attorneys general in several U.S. states into allegations of false advertising for the company's extensive "clean diesel" campaign.

So far, the emissions crisis, which erupted at the end of the quarter, is having almost no impact on the company's operations. Group revenue, which excludes sales from Volkswagen's joint ventures in China, rose 5.3% to €51.5 billion, boosted by strong sales in Western Europe and bucking the continued decline in emerging markets such as Russia and Brazil.

The performance of the company's main car brands remained strong in the quarter, though the deterioration of emerging markets such as Russia and Brazil continued and sales and earnings in China weakened. The slowdown in China, Volkswagen's biggest market, could be of particular concern because of it big contribution to Volkswagen's profit.

In the first nine months of the year, Volkswagen sales in China fell more than 5% to 2.6 million vehicles and profit from its joint ventures fell slightly to €3.8 billion from €3.9 billion a year ago.

The question that Volkswagen still can't answer is how much the crisis is going to cost in the end and how that will impact the company's longer term financial health.

There were few answers in the interim report.

The final bill for the emissions crisis will be determined by the costs of fixing customers' cars, potentially billions in fines from the U.S. Environmental Protection Agency and other regulators, as well as possible compensation for shareholders and customers.

Moody's, the credit rating agency, has estimated that in the worst case, Volkswagen's total cost for the emissions crisis could be as high as €31 billion to the end of 2017. Volkswagen has called that pure speculation.

One part of the math within Volkswagen's control is how it manages the recall.

Volkswagen plans to begin a global recall of up to 11 million vehicles next year, but the details are still sketchy. Many of the cars affected will be fixed with a relatively simple and inexpensive software update on the engine's controller.

But the company has said that older models will require a costly hardware fix. That is why Volkswagen is considering swapping older diesel models for new models, offering customers that turn in old diesel models a hefty discount on a new car, according to a person familiar with the situation.

Analysts warn that a kind of cash-for-clunkers program that offers customers a steep discount on a new car could send the recall costs, now slated at €6.7 billion, skyrocketing.

One factor working in Volkswagen's favor is that the company is still generating a lot of cash and it has a number of assets that it can turn into cash. Some analysts have suggested Volkswagen could sell minority stakes in its profit-engines, Audi and Porsche, for example.

Volkswagen recently sold its stake in Japanese auto maker Suzuki Motor Corp, which led to a capital gain of €1.5 billion that helped boost the company's net liquidity to €27.8 billion at the end of September. Liquidity, which is cash and securities after liabilities, was €21.5 billion at the end of June.

Frank Witter, Volkswagen's chief finance officer, said the car maker has "very solid and robust liquidity resources. This will help us manage the challenging situation caused by the financial impact of the diesel issue."

Write to William Boston at william.boston@wsj.com

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(END) Dow Jones Newswires

October 28, 2015 09:15 ET (13:15 GMT)