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Dieselgate's Financial Cost Might Reach $10 Billion, Analysts Estimate

Volkswagen is expected to raise its provisions for the Dieselgate scandal to over $10 billion, analysts say.
Volkswagen Beetle TDI 1 photo
Considering that Volkswagen might buy back over 500,000 vehicles in the USA and a compensation of $5,000 is also on the table, the figures estimated by analysts seem adequate for the situation.

Furthermore, the German company will still have to pay several fines and penalties in several states, and the outstanding total might exceed the $10 billion mark once the cars are fixed.

Initially, Volkswagen announced that they had set aside 6.7 billion euros, the equivalent of $7.6 billion, to help them overcome the Dieselgate situation. The assessment was made last fall, when the Volkswagen scandal had just started to unravel.

Unfortunately for Volkswagen, investigators keep finding skeletons in the company’s closets, and the situation is getting worse as the inquiries continue. No matter what the solution, it seems that carmaker's problems are not going away for cheap.

According to Bloomberg, Judge Charles Breyer said that fixing the 600,000 Dieselgate-affected vehicles sold in the USA or getting them off the road through buy-backs would be “the first step to any settlement.” Volkswagen’s problems with the Dieselgate scandal are not limited to the United States of America, as the German company has sold around 11 million vehicles with various “defeat devices.”

Other governments and the European Union are expected to ask Volkswagen to provide some compensation to owners of the affected cars, as well as potential fines to be paid in several states.

Interestingly, the seven-month scandal has not led to plunging stock market value for Volkswagen’s listing. Investor optimism is growing, as the company’s stock price rose 6.6 percent yesterday, and it looks like Volkswagen’s market value is not going down because of this situation.

The same cannot be said for Mitsubishi, a Japanese carmaker that was caught manipulating fuel economy tests and suffered a severe decrease in stock value.

Curiously, Mitsubishi did not use any devices to deceive testing, but bent standards for rolling resistance and drag while testing some of the cars they sold on the local market. In the case of Mitsubishi, around 600,000 units were affected, so the situation in Japan is comparable to Volkswagen’s in the USA regarding volume.

Unfortunately, Mitsubishi might not have the financial resources to survive this scandal, as Volkswagen is expected to do.

 
 
 
 
 

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