VW says 2015 loss hit $6.2B

Fund tops $18B for scandal costs

Matthias Mueller, Volkswagen chief executive officer, said Friday in Wolfsburg, Germany, that the automaker can overcome the crisis without cutting jobs.
Matthias Mueller, Volkswagen chief executive officer, said Friday in Wolfsburg, Germany, that the automaker can overcome the crisis without cutting jobs.

FRANKFURT, Germany -- Volkswagen reported a record loss for 2015 on Friday as it set aside more than $18 billion to cover the cost of fines, legal claims and recalls in the United States and other countries related to diesel emissions cheating.

Volkswagen said it lost $6.2 billion last year, compared with a profit of $2.8 billion in 2014.

The company increased the amount of money it was setting aside for the scandal, to $18.2 billion. That was up from $7.5 billion previously.

"The current crisis -- as the figures presented today reveal -- is having a huge impact on Volkswagen's financial position," Chief Executive Officer Matthias Mueller said in a statement, adding that the "repercussions of the emissions issue are now quantifiable."

There were also indications Friday that controversy about diesel engines was spreading to other carmakers.

The German Transport Ministry said it was ordering the recall of 630,000 diesel cars because they were programmed to turn down emissions controls in cold weather. However, the ministry said that except for Volkswagen, none of the companies had illegal software designed to produce artificially low emissions under test conditions. The brands whose vehicles are subject to recall include Mercedes-Benz, General Motors' Opel unit, Volkswagen, Audi and Porsche.

Daimler, the maker of Mercedes cars, disclosed early Friday that it was under investigation by the U.S. Department of Justice in connection with emissions testing. On Thursday, French authorities investigating potential automobile emissions anomalies gathered documents from the offices of PSA Group, the parent of Peugeot and Citroen. PSA said it was cooperating with the investigation.

Volkswagen, after a meeting Friday of its supervisory board in Wolfsburg, Germany, where the company has its headquarters, also said it would delay the publication of a widely anticipated internal investigation of how the diesel cheating came about. Instead of releasing the information this month as promised, the company will wait at least until it works out a settlement with the Justice Department.

Volkswagen has admitted that its employees programmed 11 million cars so that pollution controls operated at full capacity only when the vehicles were being tested. But seven months after the illegal emissions manipulation came to light, the company has not clarified who was responsible for the wrongdoing and whether any top managers were involved.

On advice of the company's attorneys, management and directors, the company said "a disclosure of interim results of the investigation at this point in time would present unacceptable risks for Volkswagen and, therefore, cannot take place now."

Mueller said as he released the headline earnings numbers that the company remains "fundamentally healthy" and that he is "convinced that Volkswagen has what it takes to overcome its challenges."

The law firm Jones Day has been poring over documents and computer files and interviewing employees, but it has not yet issued its conclusions. The law firm declined to comment.

Volkswagen's financial disclosure Friday, in a preliminary earnings report, came a day after the company agreed on the outlines of a plan to settle some legal claims in the United States, which would include giving owners of about 500,000 affected vehicles the option of selling the cars back to the company or of having them repaired.

Volkswagen is still negotiating the size of the fines it will pay to the U.S. government for violations of clean-air laws, as well as how much additional compensation it will provide to owners. The money set aside by the company Friday provides an indication of what Volkswagen expects the total global costs of the scandal to be, although the figure could rise further.

Volkswagen had delayed reporting its annual earnings because of uncertainty about the size of the financial damage.

The wrongdoing by Volkswagen has also led to increased scrutiny of other carmakers.

Daimler, based in Stuttgart, Germany, disclosed early Friday that it was conducting an internal investigation at the request of the Justice Department into the procedures it uses to certify exhaust emissions.

Joerg Howe, a spokesman for Daimler, said the company was cooperating with U.S. authorities but declined to comment further.

The potential for Daimler's Mercedes unit to become embroiled in a scandal of the same scope as Volkswagen is probably limited because it sells relatively few diesel vehicles in the United States, analysts said.

Cars with diesel engines accounted for less than 3 percent of the 340,000 passenger cars that Mercedes sold in the United States last year.

Volkswagen, though, promoted so-called clean diesel heavily in an attempt to win environmentally conscious buyers. Vehicles with diesel engines accounted for more than 23 percent of the Volks­wagen-brand cars sold in the United States in August 2015, a month before the emissions cheating came to light.

Volkswagen, which had $27.5 billion in net liquidity at the end of December, is insistent that its operations are robust enough to allow it to overcome the crisis without cutting jobs, Mueller said Friday at a briefing at its Wolfsburg headquarters.

"No question, Volkswagen will bounce back," said Erich Joachimsthaler, founder and chief executive officer of New York-based brand-strategy firm Vivaldi Partners Group. "Brands are resilient, and research shows that the stronger the brand, the more likely the bounce back even in light of severe transgressions."

Information for this article was contributed by Jack Ewing of The New York Times; by David Mchugh and Frank Jordans of The Associated Press; and by Christoph Rauwald of Bloomberg News.

A Section on 04/23/2016

Upcoming Events