Volkswagen Confirms Its Biggest Annual Loss Ever After $18 Billion Hit Over Diesels
Volkswagen AG (VLKAY) announced the biggest annual loss in its history and slashed its dividend to a few token cents after taking an $18 billion hit from the diesel emissions scandal.
Europe’s largest carmaker, which agreed on Thursday to offer to buy back most of the 600,000 cars it sold illegally in the U.S., said that its 2015 accounts would take total provisions of 16.2 billion euros for losses arising from the scandal, a figures that more than wiped out a basic operating profit of €12.7 billion (which was largely unchanged from the previous year). The company had initially put aside €6.5 billion immediately after the scandal broke, and Friday’s figure confirms reports that the provisions related to Thursday’s developments would be around the €10 billion mark.
To conserve cash, the company has cut the per-share dividend on its voting shares to 11 euro cents from €4.80 a year ago, and cut the dividend on its more broadly held preferred shares to 17c from €4.86.
VW is late reporting its full-year results because it couldn’t say with accuracy how much the diesel issue would cost it until yesterday, when it agreed the broad outlines of a deal to compensate drivers.
The company said in a statement that the long-running diesel scandal would continue to weigh on it this year, forecasting that revenue would drop up to 5% from last year’s €213 billion. It also blamed weak market conditions in Latin America and Russia as well as exchange rate fluctuations for that outlook. Its 2015 numbers had been flattered somewhat by the weakness of the euro, VW’s accounting currency.
The company didn’t say anything about its bonus policy for management and board members, which has been causing a furore in Germany in recent weeks. The website Der Spiegel reported Friday that Chairman Hans Dieter Pötsch, who was chief financial officer in the years when VW was illegally selling its diesels in the U.S., will net €19.7 million ($22.2 million) in bonuses for the three years from 2015-2017, a figure derived from the record profits of 2014.
“Neither the concrete developments of the 2015 business year, let alone those of 2016 and 2017, were foreseeable at the time the dissolution of (my contract as CFO) was being drafted,” Pötsch told Der Spiegel.
That’s a claim that will raise a few eyebrows. Pötsch was elevated to his present post in October, weeks after the scandal broke. By that time, investors were pretty clear that the scandal would cost billions, and had written down the company’s market value by a commensurate amount.
Despite the huge provisions, VW has by no means seen the last of the crisis. “We are today not in a position to preempt the outcome of negotiations which will determine the cost,” Mueller told a news conference at Volkswagen’s headquarters. It still faces civil and criminal probes in a number of countries, including Germany. The chances of an early end to those receded still further Friday when the company said in a separate statement that the internal investigation it has commissioned from law firm Jones Day would take until the fourth quarter of this year to complete. It also rowed back from a previous commitment to publish some interim findings by spring, saying that its negotiations with the U.S. authorities “have entered a decisive phase sooner than anticipated and require Volkswagen to maintain the highest degree of confidentiality.” It added: “The further disclosure or characterization of interim results, which are currently available, would likely prejudice the rest of the investigation at this time, in particular because individuals who have yet to be questioned could align their statements with the contents of the interim report.”