Volkswagen posts first losing quarter in 15 years over losses from scandal

Kuala Lumpur: Volkswagen posted its first quarterly loss in at least 15 years yesterday and said the €6.7bn set aside to cover the costs of its rigging of diesel emissions tests was likely just a start.

The news came as the carmaker's new chief executive officer prepares to fly out to China with German Chancellor Angela Merkel and other business leaders to promote trade in a major export market and to try to limit the fallout from a scandal that has rocked the auto industry, and German industry.

As a result, the German carmaker said it expected its 2015 operating profit would drop "significantly below" last year's record 12.7 billion euros, even though its auto sales are seen matching last year's record 10.14 million deliveries.

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“We are leaving no stone unturned to find out what exactly happened and to make sure nothing like this ever happens again,” Volkswagen boss Matthias Muller told analysts and investors.

Setting out a five-point plan, Muller said that while Volkswagen’s drive for perfection would continue, the company’s mindset and culture would change. He promised a major reorganisation including decentralisation and faster decision making.

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

Volkswagen plans to cut investments by 1 billion euros a year at its core division, which accounts for 5 million cars to be recalled. Luxury division Audi, source of about 40% of VW group profit, will also cut planned spending.

Group deliveries, which also include premium brands Audi and Porsche, slid 1.5% in September to 885,300 cars and fell 3.4% 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.

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Sebastiaan Van Doorn, assistant professor of enterprise at Warwick Business School, said: “While VW has reported a loss, underlying sales numbers are robust. It is likely that VW, one of the largest employers in Germany, will survive this scandal … The losses associated with this scandal will be spread out over many years.”

“The greater worry is that VW does not seem eager to change much about its corporate policy, or change its hierarchical makeup and centralised decision-making strategies that break up the interface between the top management team and middle managers.”

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