Only starting to feel the financial pain from its diesel emissions scandal, Volkswagen AG reported a $1.83 billion third-quarter loss on Wednesday.
The German maker also announced that it saw a 1.5% year-over-year decline in vehicle sales for the first nine months of 2015, to 7,430,794. VW surged to first place in the global sales race during the first half of the year, but it has now slipped back into second, losing its lead to Toyota Motor Co.
Third-quarter sales and earnings were only partially impacted by the revelation that VW had cheated on diesel emissions tests by installing special software in 11 million vehicles sold worldwide – including 482,000 in the U.S. During an appearance at the Tokyo Motor Show earlier on Wednesday, a senior VW official bowed an issued an apology.
“On behalf of my company, I would like to apologize,” said Herbert Diess, the new head of Volkswagen’s passenger car operations. He want on the promise it would never happen again.
During a noisy scrum with reporters, Diess was asked if it would be possible for VW to again become the world’s best-selling automaker. He responded that sales were low on his priority list. “We are doing everything we can to bring back…trust in our brand,” he explained. “Then we talk about market share.”
(To see how the diesel scandal is hammering prices for new and used VWs, Click Here.)
VW quickly apologized after the cheating was revealed by the U.S. Environmental Protection Agency last month. It has fired or suspended a number of senior executives, including former CEO Martin Winterkorn. And it has suspended sales of vehicles using its small EA 189 diesel engine.
That showed up in the numbers. VW posted a relatively modest 1% sales increase in the U.S. in September, compared to an overall market increase of 16%.
But the scandal is expected to have a much more significant impact on sales and earnings in the months to come. Diesels account for about half of the carmaker’s sales in Europe and a quarter of its volume in the United States.
The diesel scandal isn’t Volkswagen’s only problem. The maker has been hurt by the ongoing slowdown in sales in China where it has been the top-selling manufacturer. It has been hit by the slumping Brazilian and Argentine economies, as well. And it was already struggling to regain momentum in the U.S. market even before the diesel scandal broke.
How much more the diesel scandal will hit the bottom line remains unclear, but the automaker faces potential fines of more than $18 billion for violating U.S. Clean Air rules. It could see massive penalties levied by the Justice Department, as well. And there are now more than a dozen class action lawsuits. And that’s just in the U.S. Germany is among a number of other countries staging investigations of their own.
The automaker has set aside $7.3 billion to cover the cost of the scandal, but industry analysts generally believe that figure will fall far short of the final price tag. But the maker has downplayed a report from Credit Suisse that projects the eventually cost will come in closer to $87 billion.
(Could VW diesel scam really cost it $87 bil? Click Here to find out.)
