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Volkswagen’s horror quarter ends with $3.9 billion loss

Volkswagen AG (VLKAY) swung, inevitably, to its first quarterly loss in over 15 years in the three months to September, but the company’s shares rose sharply as the market realized just how much money it still has, after turning in a solid third quarter.

The German group said underlying operating profit rose at all of its largest brands, including VW, Audi, Porsche and Skoda, in the quarter, even though it lost its crown as the world’s biggest automaker by sales to Toyota Motor (TOYOF). The performance was helped by a cost-savings program, by the weakness of the euro against the dollar and yen, but also, in the case of Audi and Skoda, by improved product mixes.

The emissions scandal, which broke in late September, came too late in the quarter to have any meaningful impact on sales.

Most importantly, in the financial markets’ eyes, the amount of cash on hand at the company rose to a net €27.8 billion ($30.7 billion) at the end of the quarter. Net cash flow, over the first nine months of the year, more than doubled from a year earlier to €11.8 billion, over €3 billion of which came from the sale of its stake in Japan’s Suzuki.

Those figures gave comfort that the company will be able to cope with the financial costs of the scandal without too much damage to its balance sheet. The company set aside €6.7 billion to cover the costs of the scandal in September, generating an operating loss of €3.5 billion for the quarter, and a net loss of €1.67 billion.

“The figures show the core strength of the Volkswagen Group on the one hand, ” CEO Müller said in a statement. “On the other 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.”

But despite the brave face, the company had to put out a lengthy list of possible legal risks in its full interim statement. It was forced to say that the main reason it hadn’t put aside any fresh reserves was that it was still too early to make a reasonable forecast of the total costs.

In its earnings statement, VW said only that it expects full-year operating profit to be down “significantly” from last year’s level, and said the 4% rise in sales revenues that it expects still depends on conditions not getting any worse in Latin America and eastern Europe. Brazil and Russia, two of its biggest markets, are both deep in recession.