Volkswagen's diesel scandal costs hit $33 billion with new Audi penalty

Volkswagen is once again counting the cost of cheating on diesel engine emissions tests.The German ca...

Posted: Oct 16, 2018 3:03 PM
Updated: Oct 16, 2018 3:03 PM

Volkswagen is once again counting the cost of cheating on diesel engine emissions tests.

The German carmaker said Tuesday that it had been hit with a new fine relating to failings at its Audi subsidiary, sending the total cost of the scandal to nearly $33 billion.

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Volkswagen admitted in 2015 to cheating on clean air rules with software that made emissions look less toxic than they actually were.

Munich prosecutors on Tuesday imposed a fine of €800 million ($926 million) on Audi, taking the total cost to the Volkswagen Group globally to €28.2 billion ($32.7 billion). That includes fines and other penalties, payments to authorities and the cost of compensation and retrofitting vehicles, according to a company spokesperson.

That is equivalent to 12% of Volkswagen's annual sales last year and more than its profit before special items, which stood at €17 billion ($19.7 billion) in 2017.

There could be yet more costs to come. Volkswagen is still facing a number of lawsuits, including one by shareholders in Germany who are claiming the company misled them. They're demanding more than €9 billion ($10.4 billion) in damages.

Volkswagen said Tuesday it accepted the fine imposed by German prosecutors, waving its right to appeal. It said the penalty would hit earnings this year.

"As a negative special item, [it will] reduce the group earnings for fiscal year 2018 accordingly," it said in a statement.

The fine concludes the Munich prosecutors' investigation into the company. However, probes into executives, including Audi's former CEO Rupert Stadler, continue, the prosecutors said.

The €800 million fine comprises a €5 million penalty for administrative offenses, the maximum allowed under German law.

On top of that, prosecutors ordered Volkswagen to repay €795 million they said the company made from the cheating. The prosecutors said this included profits from the sales of affected vehicles.

In this case, the diesel emissions cheating affected nearly 5 million cars sold by the Volkswagen group in Europe and the United States, prosecutors said. Specifically, it concerned V6 and V8 diesel engines manufactured by Audi and installed in Audi, Volkswagen and Porsche brands, and Audi vehicles equipped with EA 189 and EA 288 engine made by Volkswagen.

Shares in Volkswagen (VLKAF) and Audi (AUDVF) were trading higher on Tuesday. Volkswagen stock is down 11% so far this year.

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