Volkswagen takes another hit after new ‘smoking’ findings

Posted on October 24, 2017

Two years have passed since one of the biggest car manufacturers in the world admitted that they ‘cheated the tests’.


It was in September of 2015 when the company released a statement literally saying “We’ve totally screwed up”, quoting the remarks of the head of its American branch, Michael Horn, who acknowledged that the company had “broken the trust of our customers and the public” after a review from the Environmental Protection Agency (EPA) found that the company was using a “defeat device” to improve the results of diesel emissions tests.


Along with this statement, named by reporters as the ‘Dieselgate’ incident, the company disclosed that around 11 million vehicles worldwide could be using such software in order to cheat on emission testing procedures and estimated that the cost of repurchasing or fixing many of these cars would be around $27 billion.


The scandal has been quite disastrous for VW’s shareholders, as its shares have lost almost half their value, based on its pre-scandal prices. And new findings have unveiled that the size of the bill could be increased by $3 billion after the company disclosed that fixing some of the automobile’s hardware has been tougher than they initially thought.


Investors are obviously concerned about the potential future repercussions of these new findings, as this estimate might fall short from the actual definite bill.


To add up to this recent news, the company’s former engine chief Wolfgang Hatz was apparently arrested by German police as investigations continue to unveil who was the mastermind behind this massive attempt to cheat regulators. Additionally to Hatz arrest, another three VW’s staff members have been arrested, and certain former key executives are still being investigated, including Martin Winterkorn, its former Chief Executive.


An analyst from Evercore ISI, an investment banking advisory firm, has said that “this is yet another unexpected and unwelcome announcement from VW, not only from an earnings and cash flow perspective but also with respect to the credibility of management”.


Certainly, the company is struggling to maintain its customer base and this recent news is not helping them at all. The diesel market is still a very small one to be considered an important piece of VW’s portfolio, but this scandal has surely affected the public’s perception, and it could cause considerable damages to the brand’s overall reputation.


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