Earnings Slump

Counting the Cost of Dieselgate

VW Volkswagen CEO Matthias Mueller car Phideon source Uli Deck dpa 55752445
VW CEO Matthias Müller has been tasked with steering the carmaker through the biggest scandal since it was founded in 1937.
  • Why it matters

    Why it matters

    VW’s diesel emissions scandal could hurt sales of its core brand for years to come, delaying the carmaker’s recovery.

  • Facts


    • Volkswagen admitted last September it had manipulated around 11 million diesel vehicles worldwide.
    • VW’s revenue fell 3.4 percent in the first quarter to €51 billion, and net profit slumped 19.3 percent to €2.4 billion.
    • The core VW passenger car brand’s profitability almost evaporated to 0.3 percent of sales.
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VW’s diesel emissions scandal continues to haunt Europe’s largest carmaker, whose latest figures help to put a number on the extent of the damage.

The Wolfsburg-based firm, which last September admitted to manipulating 11 million diesel cars worldwide, reported an almost 20-percent drop in its first-quarter net profit on Tuesday, sending its shares down as much as 5 percent.

In the wake of the Dieselgate scandal, which has hurt VW’s reputation as a reliable German car manufacturer, the company was forced to hand out discounts to keep selling its namesake VW brand cars, sending its profitability up in smoke.

“This is related to the diesel scandal...As long as VW is being talked about and is making headlines in the press, it could take another one or two years.”

Sascha Gommel, Analyst, Commerzbank

With the rebates, VW aimed to stem the loss of market share. “This is related to the diesel scandal, making it hard to sell VW brand cars. That’s why they are giving discounts,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank, told Handelsblatt Global Edition.

The drop in profit at VW’s core brand was one of the main reasons why the group’s net profit fell 19.3 percent to €2.4 billion. A 25-percent drop in operating profit at VW’s Chinese joint ventures also weighed on earnings.

Mr. Gommel expected the scandal to continue to impact the carmaker’s reputation. “As long as VW is being talked about and is making headlines in the press, it could take another one or two years,” he said.

After Volkswagen announced its figures, the carmaker’s preference shares fell as much 5 percent on Tuesday morning and traded down 2.5 percent at €134.50 by 11.20 a.m. in Frankfurt. The German blue-chip DAX index lost 0.2 percent in morning trading.


VW Hit by Dieselgate-01


VW’s preference shares had been recovering of late but are still down 17 percent compared with the level seen mid-September, before the diesel scandal became public.

Last month, the carmaker set aside €16.2 billion to cover costs to settle the diesel affair, bringing some clarity to the issue for the company. The charge, mostly for settlements with the U.S. regulators who uncovered the scandal, led to a €1.4-billion loss at VW in 2015.

Volkswagen did not announce any new charges on Tuesday, but the figures revealed the biggest damage so far has been to the core brand. VW’s namesake passenger car brand reported a profit margin of just 0.3 percent in the first three months of this year, generating an operating profit of €73 million, excluding special items. By comparison, last year the VW brand posted an operating profit of €514 million and a profit margin of 2 percent.

The VW brand is typically the largest contributor to sales – making up half of the company’s revenue – but is now among the carmaker’s lowest-earning businesses. VW’s luxury brand Audi had an operating profit margin of 9 percent in the first quarter, while its sports car brand Porsche registered 16.6 percent.

Sales of the VW car brand fell 4.7 percent to €25.1 billion in the first quarter compared with the same period last year, making it the main cause for a 3.4-percent fall in the group’s revenue to €51 billion.


Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. To contact the author:  kreijger@handelsblatt.com

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