VW back on track

BERLIN–German auto giant Volkswagen has lifted its forecast for the year after swinging back to profit, but the fallout from the group’s ‘dieselgate’ emissions cheating scandal weighed heavily on its luxury brand Audi.

One year on from the crisis, the VW group’s recovery appeared on track as it posted net profit of 2,3 billion euros (US$2,5 billion) for the three months to September.

That was slightly less than analysts had predicted but a sharp improvement from the 1,7-billion euro net loss over the same period last year.

“Despite major challenges and the negative impact of the diesel issue, the Volkswagen group remains on a solid financial footing,” said chief financial officer Frank Witter in a statement.

But the result was overshadowed by news that Audi, the biggest contributor to VW’s profits, had lowered its own outlook as it grapples with rising costs related to dieselgate and a recall over faulty airbags made by supplier Takata.

VW was plunged into its deepest-ever crisis after it admitted in September last year that it had installed cheating software in 11 million diesel engines worldwide to make them seem less polluting than they were.

The controversy pushed VW into the red for the first time in more than 20 years when it booked a loss of 1,6 billion euros in 2015 due to the provisions it was forced to set aside to cover the costs of the crisis.

The improved outlook for the group came two days after a US judge granted final approval for a US$14,7-billion class action settlement in the emissions cheating scandal, the largest of its kind by a car manufacturer.

It offers compensation to nearly half a million owners of polluting Volkswagen and Audi diesel-powered vehicles in the US, and resolves some claims brought by environmental regulators who had sought penalties for VW’s violations of pollution laws.

But the company is still in talks with US federal prosecutors to settle criminal allegations related to the cheating.

VW also needs to conclude a separate settlement in the US concerning about 80 000 Audi and Porsche cars with 3,0 litre engines equipped with the so-called defeat devices.

Audi, which developed the group’s 3,0-litre engines, said Thursday it had to deal with “additional financial burdens” amounting to 620 million euros in the third quarter.

It added that it expected its operating return on sales for 2016 to be “considerably below” its target of 8 to 10%.

Meanwhile, the VW group still faces a myriad of lawsuits in Europe where it has pledged to fix the rigged cars by next year.

It has not offered compensation to European owners however, much to the dismay of EU officials who have piled pressure on VW to show the same generosity as in the US. –

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