reginos:

The latest estimates in the international Press relating to the costs to VW from the emissions affair are some €40 billion in direct costs (repairs, replacements fines, lawsuits) and another one time that amount in loss of revenues due to falling sales.

If the above prove true then VW AG with an operating profit  of €12+ billion in 2014, will not be able to withstand without government assistance. It will be no problem for the Federal Government to intervene if the politicians evaluate that  VW falls in the "too big to fail" category. Germany has a GDP of over €14 trillion and the €80 billion which might be required is peanuts if you think that they average at €1.000 per German citizen. Besides, €80 billion is what Germany has given to Greece (so far) which we all know will never be repaid. From VW the German government might even get a profit when the company will be re-privatized in a few years time.

The reduction in sales IMO will be temporary and it will last 2-3 years max simply because VW Group make outstanding cars. Many of those who have tried them rarely look back to other brands.

The liability might be reduced if VW unloads some of its brands which fall in the "nice to have" category and are non-essential or those that are unprofitable. The ultra British Bentley and the hot Italian Lamborghini and Ducati don't suit VW at all and could be easily sold. SEAT has been a constant liability and could be discontinued without consequences, if selling this brand was to prove difficult. And Bugatti is an expensive aberration that resulted from Piech's megalomania which VW could do without.

Additionally, VW could sell part of Porsche through an IPO, similar to what FCA is doing with Ferrari.

I am very optimistic that in 3 years time no one will care to remember EPA's malicious witch-hunt.

 

 

 

 

 


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"Form follows function"

 

Costs relating to the Clean Air Act and the subsequent recall and legal actions will be apportioned across multiple periods; therefore, the financial impact is not an one-time expense but, instead, a reoccurring expense.  Volkswagen also has several financing mechanisms available from lines of credit to debt and equity offerings.