By William Boston
Volkswagen AG dramatically increased its charge to 2015 earnings
for costs of an emissions-cheating scandal, resulting in its worst
annual loss, as authorities world-wide pursue new crackdowns on it
and other car makers.
Germany's largest auto maker reported a net loss of EUR1.58
billion ($1.77 billion) last year, stemming from a EUR16.9 billion
charge to earnings. The bulk of the set-aside covers a buyback of
nearly 500,000 cars in the U.S., as well as legal claims from a
global recall of 11 million vehicles. Affected models world-wide
include the company's Volkswagen, Audi, Porsche, Seat and Skoda
brands.
Separately, German authorities on Friday stepped up emissions
enforcement, requiring Daimler AG, Volkswagen and General Motors
Co. to recall 630,000 diesel-powered cars to repair defective
emissions controls, suggesting a wider problem in testing. French
officials also raided offices of auto maker PSA Groupe this week.
None of the latest recalls include accusations of wrongdoing.
"There is no question that the diesel issue is a heavy burden on
the company's results," Chief Executive Matthias Müller said after
a meeting of Volkswagen's supervisory board in Wolfsburg, Germany,
on Friday.
He added there could be further costs from settlement
discussions with the U.S. Justice Department and other authorities.
Volkswagen's agreement in principle doesn't include potential U.S.
criminal penalties, or compensation for investors. It also faces
lawsuits in Europe.
"We still have a lot of work ahead of us," Mr. Müller said.
The company's financial results for 2015 were twice delayed
while it pursued an investigation in the years-old deception that
involved programming engines to dupe diesel-emissions tests. Though
large, the charge provided some reassurance to investors.
The company's shares initially fell sharply in Frankfurt trading
on Friday, but retraced some of the decline to finish the day off
1.3% at EUR125.45.
Volkswagen sold 10 million vehicles last year, a 2% decline from
the year before and narrowly behind Toyota Motor Corp.'s 10.2
million vehicles. The company's revenue last year rose 5.4% to
EUR213.3 billion. Directors proposed paying a symbolic per share
dividend of 11 European cents for ordinary shares and 17 cents for
preferred, down from EUR4.80 and EUR4.86, respectively, a year
earlier.
The financial impact so far outstrips that endured by other auto
makers that were charged with improper conduct in connection with
recalls in recent years. General Motors admitted criminal
wrongdoing in 2015 and paid more than $2 billion to settle U.S.
charges and compensate accident victims, shareholders and others
claiming injuries. It still faces continuing lawsuits stemming from
a defective ignition-switch. Toyota paid a $1.2 billion penalty to
the U.S. for misleading consumers about safety problems in
2015.
Volkswagen's stock price is down more than 20% since the
emission-cheating scandal was disclosed in September, even after
rising about 15% this week as the deal to compensate U.S. customers
surfaced.
There were separate developments in Europe that appeared to show
that fudging emissions results in diesel-powered engines could be
more widespread.
Daimler, which makes Mercedes-Benz cars, said on Friday that it
was conducting an internal investigation of emissions software at
the request of the Justice Department. The probe pertains to the
certification process of the company's diesel cars in the U.S.
Daimler declined further comment, but said it would cooperate with
U.S. authorities.
In France, officials searched for documents at the headquarters
of the company that makes Peugeot and Citröen cars, part of a
continuing pollution probe that included a raid of Renault SA
offices earlier this year.
In Germany, Volkswagen, Audi, Porsche, General Motors' Opel, and
Mercedes-Benz agreed to voluntarily recall 630,000 diesel vehicles
across Europe to fix engine control software. The country's
transport minister, Alexander Dobrindt, said the affected vehicles
had engines that were tuned to suppress emissions control at low
temperatures, a so-called thermal window that is allowed under
European rules to protect engine components. But government tests
of 53 models found a widespread practice of turning off emissions
controls even at normal temperatures, he said.
"There are doubts whether the applied thermal window was always
justified on some of the tested cars," Mr. Dobrindt said, but added
that it wasn't illegal.
GM's Opel business unit and Mercedes-Benz owner Daimler welcomed
the report as confirmation that they never deployed an illegal
defeat device. The manufacturers said they would take measures to
further reduce nitrogen oxide emissions.
Mr. Dobrindt said non-German brands were also tested, including
Alfa Romeo, Chevrolet, Dacia, Hyundai, Jaguar, Jeep, Land Rover,
Nissan and Suzuki.
The government study was commissioned in the wake of the
Volkswagen scandal to see if other diesel manufacturers were also
cheating.
"No vehicle was identified that used the same defeat device
software as Volkswagen," the minister said.
Volkswagen began this week to make considerable progress in
resolving its emissions-cheating scandal more than six months after
admitting it manipulated diesel-engine software to suppress
emissions in the lab but allow higher nitrogen-oxide levels during
normal driving.
While it reached a preliminary deal with U.S. authorities and
car owners, it still hasn't answered key questions about the
scandal, especially who decided to manipulate the engines and
whether top executives were involved. The company commissioned U.S.
law firm Jones Day to carry out an investigation and promised an
interim report this month.
Volkswagen is under pressure from the Justice Department not to
release key facts in the case while the government's criminal
investigation continues.
Wolfgang Porsche, patriarch of the clan that controls a majority
of Volkswagen's voting stock, said the company wouldn't release
details of its internal investigation until there is a final
settlement with the Justice Department.
"Publication at this time would bear unacceptable risks," Mr.
Porsche said.
--Ruth Bender and Ilka Kopplin contributed to this article.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
April 22, 2016 16:50 ET (20:50 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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