Volkswagen’s Dieselgate costs top $33.6 billion

The Volkswagen Group has announced it has met its first quarter operating profit forecasts for 2019, despite a further special provision to its balance sheet to cover mounting costs related to the Dieselgate diesel emission manipulation scandal.

The German car maker, whose portfolio of brands include Volkswagen, Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat and Skoda among others, says it set aside a further €1 billion ($US1.1 billion) during the first three months of this year due to legal risks associated with diesel emission manipulation charges, bringing the total cost of the Dieselgate scandal to more than €30 billion ($US33.6 billion).

The Volkswagen Group claims the latest provision is unrelated to the recent charges filed by the Braunschweig public prosecutor’s office in Germany against its former CEO Martin Winterkorn and four other as yet unnamed ex-executives.

Despite mounting Dieselgate costs, the Volkswagen Group remains upbeat on growth prospects for 2019. Increased sales of SUV models and savings from an extensive cost-cutting programme has led it to forecast revenue growth of 5% this year, as well as a group operating return on sales of between 6.5 and 7.5%.

Group sales for the period were down by 2.8% at 2.1 million vehicles.

The Volkswagen Group’s operating profit before interest and taxes for the first quarter of 2019 was €3.9 billion ($US4.4 billion), down from €4.2 billion ($US4.7 billion) in 2018 but in line with analyst expectations.

The moderate drop in operating profit is attributed to difficulties in engineering new models to meet strict new WLTP emission regulations introduced in Europe late last year as well as economic weakness in a number of key markets, including China, Russia and South America, and Dieselgate legal issue, the Volkswagen Group said.