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Volkswagen鈥檚 new chief says firm will provide refits on 11m vehicles
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VOLKSWAGEN yesterday announced plans to refit up to 11 million vehicles and overhaul its namesake brand following the scandal over its rigging of emissions tests.
The company’s new Chief Executive Matthias Mueller said the German carmaker will ask customers “in the next few days” to have diesel vehicles that contained illegal software refitted, a move that some analysts have said could cost more than US$6.5 billion.
Europe’s biggest carmaker has admitted cheating in diesel emissions tests in the United States, while Germany’s transport minister said it also manipulated them in Europe, where Volkswagen sells about 40 percent of its vehicles.
The company is under huge pressure to address the worst business crisis in its 78-year history, which has wiped more than a third off its market value, sent shock waves through the global car market and could harm Germany’s economy.
“We are facing a long trudge and a lot of hard work,” Mueller told a closed-door gathering of about 1,000 top managers at Volkswagen’s Wolfsburg headquarters late on Monday.
“We will only be able to make progress in steps and there will be setbacks,” he said, according to a text seen by Reuters.
The company did not say how the planned refit would make cars with the “cheat” software comply with regulations, or how it might affect vehicles’ mileage or efficiency.
Manipulating emissions results allowed Volkswagen to keep down engine costs in a “clean diesel” strategy that was popular in Europe and at the heart of a drive to improve US results.
Mueller was appointed CEO last Friday to replace Martin Winterkorn. German prosecutors said on Monday that they are investigating Winterkorn over allegations of fraud.
The crisis is an embarrassment for Germany, which has for years held up Volkswagen as a model of its engineering prowess and has lobbied against tighter regulations on carmakers. The German car industry employs more than 750,000 people and is a major source of export income.
Germany’s KBA watchdog had set Volkswagen an October 7 deadline for it to present a plan to bring diesel emissions into line with the law.
Germany’s transport ministry said yesterday it had set up an investigative commission and was holding talks with the US Environmental Protection Agency over the scandal.
Investors are impatient for answers too. In a survey by Evercore ISI of 62 institutions, about two-thirds said it would not be possible to invest in Volkswagen over the next six months if costs, fines, legal and criminal proceedings were outstanding or inadequately quantified.
VW’s brand image has also slumped this month, market research firm YouGov said yesterday, citing the results of a survey of about 2,000 consumers.
Volkswagen said previously that about 11 million vehicles were fitted with software capable of cheating emissions tests, including 5 million at its VW brand, 2.1 million at Audi, 1.2 million at Skoda and 1.8 million light commercial vehicles.
Refitting 11 million vehicles would be among the biggest recalls in history by a single carmaker, similar in scale to Toyota’s recall of more than 10 million between 2009 and 2010 over acceleration problems, though dwarfed by the number recalled by multiple carmakers due to faulty Takata airbags.
Volkswagen sold 10.1 million vehicles in the whole of 2014.
The company said last week it would set aside 6.5 billion euros (US$7.3 billion) in its third-quarter accounts to help cover the cost of the crisis.
Analysts, however, think that might not be enough, as it faces potential fines from regulators and prosecutors, as well as lawsuits from cheated customers.
Sweden’s chief prosecutor told Reuters that he was considering whether to start a preliminary investigation into Volkswagen.
Mueller said also that Volkswagen’s core VW division, struggling with high-fixed costs and low profit margins, would be given more autonomy, akin to the independence enjoyed by premium flagship brands Audi and Porsche.
Analysts have long urged the company to tackle the underperformance of its core mass-market brand, and in particular to dilute control from the center, which has been blamed for product delays and problems adapting to local markets.
Klaus Mohrs, the mayor of Wolfsburg where Volkswagen employs about 70,000 people, said on Monday that he expected a sharp decline in business taxes as a result of the crisis, and announced an immediate budget freeze and hiring ban.
Volkswagen’s Belgian importer, D’Ieteren, said it would offer engine upgrades to 800 customers who had ordered a vehicle with a diesel engine that was likely to have been fitted with illegal software. The importer said it would pay for the expected 2 million euros cost.
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