Where will now what Doctor the Harsha the 'De Silva' will forecast about Volkswagen now....Question is even if VW puts up a plant in South Asian Sri Lanka how much VW will spoil our environment in a 'Possible Emission Test Scandal' under a Ranil -Regime if VW bypass laws through Political Influence in our country - Volkswagen is accused of cheating on emissions tests and violating US clean-air standards. It's a serious allegation: EPA officials say nearly 500,000 cars from across VW's major brands and models (Passat, Beetle, Audi A3, Jetta) were at fault. Business Insider spoke with Michael Steel, an environmental lawyer at Morrison Foerster, about what to expect next.
According to EPA officials, each of the 482,000 offending VW cars could be subject to a maximum fine of $37,500 per car.
Link - http://www.forbes.com/sites/jaysomaney/2015/09/25/did-janet-yellen-give-the-green-light-to-buy-apple-netflix-company/
Dieselgate Scandal Could Cost Volkswagen Up To $35 Billion
Opinions expressed by Forbes Contributors
The repercussions and aftermath of Volkswagen AG‘s emissions scandal are bound to cost the German automaker dearly. Around a third of the company’s market cap was wiped out between Thursday, September 17th and Tuesday, September 22nd, followed by a rally of about 8% the next day. Further drama unfolded as the group’s CEO, Martin Winterkorn, announced his resignation, accepting responsibility for the irregularities while maintaining that he wasn’t “aware of any wrongdoing” on his part. Volkswagen, the highest-selling automaker in the world in terms of volumes, will likely be facing large fines, class-action suits, investor backlash, a possible criminal investigation, and a loss in customer perception.
Considering all of the potential consequences, how much will this scandal cost Volkswagen, in terms of both actual costs and the potential loss of sales? Below we take a look and estimate the magnitude of the impact on Volkswagen’s financials.
Government Fines And Settlements: Volkswagen has sold 482,000 cars in the U.S. since 2008 that were fitted with the “defeat devices” that helped in cheating emissions tests. According to the EPA, the fine for each vehicle that did not comply with federal clean air rules could be up to $37,500(£24,000), which means that Volkswagen could be facing fines of up to $18 billion in the U.S. This is, of course, the worst case scenario, and seems draconian relative to settlements reached by rival auto companies in recent years.
Last year, Toyota reached a $1.2 billion settlement with the Department of Justice after it was found to have concealed the problem with its sticky gas pedals that resulted in the recall of 10 million vehicles. On the other hand, GM recalled around 2.6 million cars over 10 years over faulty ignition switches that would inadvertently turn off while driving, disabling safety features such as power steering and airbags. The ignition switches are claimed to have caused at least 124 deaths and 275 injuries. GM reached a $900 million settlement with the U.S. government to avoid criminal charges. While there are other instances of recalls and fines levied on automakers, these examples provide a reference point to estimate what Volkswagen could be facing now, given that these offenses – like Volkswagen’s current predicament - had far-reaching consequences.
However, Volkswagen’s scandal is different due to the deliberateness and relative brazenness of the infraction. The company isn’t just guilty of hiding the glitch and misleading authorities; it actually designed software specifically to falsify emissions data. That said, the EPA’s fine of up to $18 billion is still likely to be settled for a significantly lower amount, depending on how Volkswagen goes about its damage control. The company could also be looking at fines from the Department of Justice and the California Air Resources Board. German regulators could also look to open an investigation, considering Volkswagen said that 11 million cars worldwide used the software. Germany’s transport minister has said that Volkswagen has admitted using the same fake emissions test in Europe as well, so the fines may keep piling up.
Recall Expenses: As mentioned above, Volkswagen has admitted that approximately 11 million of its diesel models used the defeat device that would reduce emissions while being tested, and pollute 10 to 40 times the legal limit during normal conditions. As a result, the company will have to incur the expense of recalling these vehicles, and fixing the problem. Volkswagen said that it was setting aside around $7.25 billion to cover the costs of the scandal, and a provision would be made in the upcoming Q3 financial statements. The amounts could be also reevaluated given that the investigation is still ongoing.
Private Settlements: Volkswagen will also face private class-action suits that could cost the company billions in the coming years. 50 cases have already been launched in the U.S., and the company may have to pay heavy damages considering it not only deceived authorities, but also its customers, who until now thought that they were driving cleaner cars. Moreover, according to an analysis in the L.A. Times, the federal government paid out as much as $51 million in tax incentives for Volkswagen’s diesel vehicles based on the falsified emission results. Clearly the company has a lot of parties to answer to, and in all likelihood it won’t be cheap.
Loss of Future Sales: According to a study of companies involved in fraud, the average financial punishment imposed by the market was around 7.5 times greater than the legal penalties. So on top of the fines and settlements that Volkswagen will face, the company is at risk of losing a meaningful portion of its future sales. To put this in perspective - the cars that Volkswagen sold in the U.S. that are affected by this scandal account for around 12.2% of all Volkswagen vehicles sold in the U.S. since 2008. Given that the U.S. accounts for around 6-7% of total company volumes, 0.7-0.85% of Volkswagen’s annual volumes are in jeopardy in the U.S. alone. Furthermore, the U.S. accounted for less than 5% of the 11 million affected cars, so the decline in future sales could be even greater, and that doesn’t even account for further potential customer backlash. We estimate that the decline in sales due to this scandal could be 1-2% annually in the near term.
Estimated Total Cost To Volkswagen Vs. Market Response So Far
According to our estimates, the net present value of the cost of the entire “Dieselgate” scandal for Volkswagen – which takes into account the four abovementioned factors - could be up to $34.5 billion. Our interactive model for the scandal’s impact can be viewed here on the Trefis Institutional site. Our estimates can be altered to show customized scenarios and sensitivity analysis to forecast the total cost of the scandal.