Volkswagen AG revealed today it spent $18.2 billion in 2015 trying to clean up the mess related to its diesel scandal. The company expects to spend more as time goes on, according to reports.
The automaker admitted last fall that it used a device to cheat on emissions testing for the U.S. market. More than 500,000 diesel-powered VW vehicles in the U.S. have some version of it. The resulting fallout cost many of the company’s senior executives their jobs, including its U.S. chief, Michael Horn.
Yesterday, the automaker reached a settlement with the Environmental Protection Agency and the State of California over the matter. Expected to cost as much as $10 billion, the deal will allow owners of the affected vehicles to get them fixed or simply sell them back to the automaker.
The company will also pay yet-to-be-disclosed fines and make donations to green organizations.
(Environmental groups attack VW diesel settlement. For details, Click Here.)
The impact of the scandal is immense and dragged other automakers, including Daimler AG’s luxury maker, Mercedes-Benz, into the morass as the performance of all diesels is being scrutinized.
Daimler denies any wrong doing, but also announced yesterday it was conducting an internal investigation into rumors about potential problems with its diesel testing.
Earlier today, German government officials announced five German brands, including Volkswagen, are conduction an emissions-related recall, including Volkswagen and Mercedes, according to the Associated Press.
(Volkswagen reaches settlement on diesel cheating scandal. For more, Click Here.)
While any discovery of potential damage to Daimler is in its infancy, the amount of Volkswagen’s penance is coming to light. The company delayed the release of its earnings announcement to nail down some of the numbers related to the diesel problem.
The automaker is expected to take a loss of more than $6 billion for 2015, including the $18.2 billion write down for the diesel problem. However, analysts at Warburg Research think direct cost of fines, recalls and settlements worldwide will end up reaching almost $33 billion for fines and penalties. That figure doesn’t include the company’s lost sales revenue.
(For more on Judge Breyer’s decision to delay VW’s deadline, Click Here.)
In the U.S. alone, the company is facing lawsuits in all 50 states from attorneys general, dealers and owners. Additionally, VW is subject to fines as high as $18 billion, although that is expected to be negotiated down, but still in the multiple billions of dollars.