Business

Volkswagen emissions scandal sends automaker to first quarterly loss in at least 15 years

Volkswagen posted its first quarterly loss in at least 15 years, slammed by costs related to its rigging of diesel emissions tests, and lowered its profit outlook.

Company expects its operating profit fall 'significantly below' last year's record

Sven Stein,executive vice- president of Volkswagen Group Japan, bows to make an apology at the company's press conference in Tokyo Wednesday. New CEO Herbert Diess made a verbal apology. (Eugene Hoshiko/Associated Press)

Volkswagen posted its first quarterly loss in at least 15 years, slammed by costs related to its rigging of diesel emissions tests, and lowered its profit outlook.

The German group on Wednesday reported a third-quarter operating loss of 3.48 billion euros ($5.09 billion Cdn), in line with a 3.47 billion-euro loss forecast in a Reuters poll of analysts.

VW set aside 6.7 billion euros in the July-September period to cover costs related to the manipulations affecting 11 million cars globally, up slightly from the 6.5 billion announced a week after the cheating became public on Sept. 18.

As a result, the German group said it now expected its operating profit to drop "significantly below" last year's record 12.7 billion euros.

Apology in Japan

Excluding costs of the scandal, the carmaker still expects its group operating margin to come in between 5.5 and 6.5 per cent this year, after 6.3 per cent in 2014.

Volkswagen's new chief executive Herbert Diess apologized at the Tokyo auto show Wednesday for the automaker's emissions-cheating scandal, promising to win back customer trust.

The head of VW's Japan division Sven Stein, who appeared at the VW booth before Diess, bowed for several seconds in a Japanese style of apology. Diess made no bow.

"On behalf of my entire company, I'd like to apologize," said Diess, a recent hire from BMW, stressing that the priority is to fix the problem, uncover what happened and make sure the scandal never happens again.

Cutbacks in core division

Volkswagen plans to cut investments by 1 billion euros($1.45 billion Cdn) a year at its core division, which accounts for five million cars to be recalled. Luxury division Audi, source of about 40 per cent of VW group profit, will also cut planned spending.

Volkswagen confirmed the loss it reported on Wednesday was its first quarterly loss in at least 15 years but, due to accounting changes, was unable to say precisely when the last loss occurred.

VW may need to set aside more money for measures to stabilise sales if deliveries take a hit from the scandal, Chief Executive Matthias Mueller has said. Steps could include discounts on new cars if owners turn in old models as well as cheap loans and incentives to dealers to buy back older cars.

Group deliveries, which also include premium brands Audi and Porsche, slid 1.5 per cent in September to 885,300 cars and fell 3.4 per cent in the third quarter to 2.39 million cars, causing VW to drop behind Japanese rival Toyota in nine-month global auto sales charts after clinching the top spot three months earlier.

The company is also facing legal action around the world. Today, Spain's National Court opened a probe into the emissions scandal, demanding a VW representative appear to address the environmental damage caused by its diesel cars.

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