Volkswagen agrees to pay the US $1.2 billion fine for cheating on diesel emissions tests

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Volkswagen agrees to pay the US $1.2 billion fine for cheating on diesel emissions tests

German automaker Volkswagen saw its profit slip in the first quarter as the company set aside 1 billion euros ($1.1 billion) for legal risks related to its 2015 diesel scandal.

Earnings before interest and taxes (EBIT) fell to 3.9 billion euros ($4.37 billion) from 4.2 billion a year earlier but were in line with the 3.92 billion euros expected by analysts.

Analysts praised Volkswagen’s strong EBIT results at a time when other carmakers and suppliers were cutting their outlook.

“The comparison to other companies like Daimler which posted a 30% drop in adjusted operating profit, is impressive,” Metzler analyst Juergen Pieper said.

VW said it expects its return on sales for its passenger cars business to be at the lower end of its 6.5% to 7.5% margin target for the year but analysts were impressed that VW reiterated the goal.

VW’s Bentley unit reversed losses, the carmaker said.

Volkswagen stuck to its forecast of higher unit sales, revenue growth of up to 5% this year, and for a group operating return on sales of 6.5-7.5%.

Ongoing supply bottlenecks caused by difficulties getting cars certified for stricter emissions tests, as well as economic weakness in China, South America and Russia, and legal issues pose risks to VW Group’s business, the carmaker said.

The company set aside 1 billion euros for additional legal risks from its diesel emissions cheating scandal.

VW said the provisions are not related to prosecutor charges filed last month against former VW CEO Martin Winterkorn and four other VW executives who are accused of fraud for failing to report systematic emissions cheating.

Volkswagen admitted in September 2015 to having used illegal engine control software to cheat U.S. pollution tests, triggering a global backlash against diesel and costing the carmaker 29 billion euros so far.

Passenger car sales fell 3% to 2.55 million vehicles during the quarter, with sales of the VW brand down 4.5%, but improvements in pricing and higher sales of sports utility vehicles helped.

VW’s profitable luxury brands Audi and Porsche saw sales drop 3.6% and 12.3% respectively.

Source: reuters.com

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