Volkswagen AG will pay a $1.2 billion fine imposed by German prosecutors for cheating to get around diesel-emissions regulations, closing one chapter in a three-year-old crisis even as new developments arise.
The world's biggest automaker accepts the fine and takes responsibility for its actions, it said Wednesday in a regulatory filing. The settlement of the criminal case will have a positive impact on other proceedings in Europe, the company said.
"We work with vigor on dealing with our past," VW Chief Executive Officer Herbert Diess said in a separate statement. "Further steps are necessary to gradually restore trust again in the company and the auto industry."
VW still faces a multitude of probes both in Germany and abroad, with legal proceedings in 55 countries pending and investigations into market manipulation in Germany. Investors have accused the company of informing markets too late about the probe, a view the company has contested, saying it couldn't have known the issue would balloon as it did.
The new fine comes on top of the $30 billion in provisions related to rigged engine-control software that the company has already set aside. It will add another $1.2 billion to the diesel-related cash outflow of about $4.7 billion that VW had anticipated for this year. VW had net cash of about $28 billion at the end of the first quarter, providing a substantial liquidity buffer to digest the impact.
The rigging of as many as 11 million diesel cars worldwide was uncovered by U.S. authorities in September 2015 and triggered the deepest crisis in the manufacturer's history.
"The fact that the criminal risk has now been dealt with is good news," said Arndt Ellinghorst, an analyst with Evercore ISI. "Paying out 1 billion euros [$1.18 billion] is extremely painful but in the broader context it isn't a material number."
While the company has shaken up management and introduced internal reforms, the crisis has continued to grind on. While the settlement announced on Wednesday covers a criminal investigation in Braunschweig, it doesn't affect civil claims or the shareholder lawsuits. There are also probes in Munich that are focused on the Audi brand, and in Stuttgart covering Porsche.
Just this week, Rupert Stadler, head of VW's Audi division, was named a suspect in the Munich case and his home was raided along with another member of the unit's board.
The scandal has undermined consumer demand for diesel cars, a key element in automakers' plans to meet stringent new emissions targets in Europe, and other automakers have also fallen under suspicion. Daimler AG, maker of Mercedes-Benz luxury cars, was hit with a mass recall this week after regulators concluded that it too used illegal defeat software.
Business on 06/14/2018