September 22, 2015

Volkswagen Schadenfreude

Ehhhhh. I'm not a Volkswagen detractor. I'm not big on countries like Japan that make it difficult for American car manufacturers to compete in their market by tilting the playing field against them. Germany doesn't play like Japan. In fact I have a lot of respect for German engineering. But the German sense of engineering superiority, deserves to have a bit of a kick in the pants today. Why? Because cheating, isn't winning.

News that Volkswagen cheated on their diesel emissions tests sent shudders through the company and slagged the stock price, hard. Deservedly so. None of it detracts from the fact that they're still good cars. They just don't meet (possibly unnecessarily) stringent emissions standard.
The crisis enveloping Volkswagen AG, the world's top-selling carmaker, escalated Tuesday as the company issued a profit warning following a stunning admission that some 11 million of its diesel vehicles worldwide were fitted with software at the center of a U.S. emissions scandal.

In a statement, the German company said it was setting aside around 6.5 billion euros ($7.3 billion) to cover the fallout from the scandal that is tarnishing VW's reputation for probity and seriously undermining its share price. There was no mention of any fines or penalties.

In the wake of its statement, VW's share price was down another 17.6 percent at 110.20 euros and near a four-year low. The fall comes on top of Monday's hefty 17 percent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading.

The trigger to the company's market woes was last Friday's revelation from the U.S.'s Environmental Protection Agency that VW rigged nearly half a million cars to defeat U.S. smog tests.
America's a paper tiger? If so, maybe Germany's a paper Cheetah, and by extension ISIS is a paper rattlesnake. Nothing is as big as it portrays itself. But make no mistake, this scandal is big. It's probably not enough to sink the company, but it could be a lot bigger once the fines kick in. And what does Volkswagen do about all of it's inventory that it can no longer sell? Can you imagine retro-fitting millions of vehicles? Yikes.
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