Volkswagen Issues Profit Warning Over Cost of Diesel Repairs

Volkswagen Issues Profit Warning Over Cost of Diesel Repairs

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Volkswagen was already under pressure from slipping market share in Europe and from enormous change in the industry. All carmakers are investing huge sums to prepare for expected growth in electric cars with self-driving technology. The shift could change the industry pecking order, and the cost of the scandal could impair Volkswagen’s ability to compete.

Engineering a Deception: What Led to Volkswagen’s Diesel Scandal

In September 2015, Volkswagen was accused of evading emissions standards in the U.S. The scandal has hit the company hard.


The company also faces more immediate challenges. Sales of diesel cars, an area where Volkswagen was once seen as a technology leader, have been dropping in Europe because buyers fear the health hazards, while numerous cities are planning to ban or restrict diesels in urban centers.

Diesel cars accounted for 46 percent of new car registrations in western Europe during the first half of 2017, down from 50 percent in the same period a year earlier, the European Automobile Manufacturers Association said on Thursday. Carmakers sold about 150,000 fewer diesel cars during the first six months of the year than they did in the first half of 2016.

Diesel has long been one of Volkswagen’s strong suits and its decline may help explain a drop in the company’s market share in the European Union, to 25.2 percent in August from 25.9 percent a year earlier. Still, Volkswagen remains by far the biggest carmaker in Europe.

A day before the profit warning, a prominent former manager at Volkswagen was jailed in Munich on charges related to the diesel emissions scandal.

Wolfgang Hatz, a former head of engine development, was only the second person to be held in connection with the scandal in Germany, where prosecutors have said they are investigating more than 50 suspects. His detention could presage further arrests in the case, generating more negative publicity for the company.

Under the terms of a settlement with owners in the United States, Volkswagen agreed to upgrade the emissions systems for customers who wanted to keep their cars. The company said on Friday that the technical problems apply to cars with two-liter diesel motors, which account for about 500,000 vehicles out of the total.

Volkswagen said it would provide further financial details when it reports earnings on Oct. 27. Preferred shares in the company, the most widely traded, fell about 2 percent in early trading.

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