VW Scandal Hurts Second-Quarter Profit

VW AG reported last Wednesday that their cost-cutting efforts boosted their earnings. Yet, half of their gains were wiped away by $2.4 billion in terms of diesel-related charges. This indicates that the German auto giant still got a long way to go with regards to overcoming their emissions cheating scandal. This new charge came after the company just set aside almost €16.2 billion and suggested that Chief Executive Matthias Muller speak in assuring investors last April that there will be no further significant diesel-related costs. VW said that their operating profit was €7.5 billion in the first six months of 2016. This implies a record €4.4 billion in operating profit from April to June. This is a 20% increase from the previous year. Investors cheered as the profit surge therefore pushing the brand’s shares to more than 6% higher in early trading. In spite of such report, there are still worried investors as it suggests VW is less optimistic in containing the costs of the emissions scandal because they are now facing another financial risk. “Despite Dieselgate, VW reported the best quarterly operating profit ever,” said Michael Punzet, an automotive analyst at DZ Bank AG, but he added the caveat that he maintained a “skeptical view on VW” because of remaining uncertainties about the fallout from the scandal. VW plunged into this mess starting September last year when US environmental regulators disclosed that the car giant rigged some diesel engines in order to cheat on emissions tests. This forces the resignation of the then Chief Executive Martin Winterkorn. Furthermore, it sparks investigations and varied civil litigation against the company. This is not only in the US but across the globe. True enough we cannot neglect the worry of VW investors with regards to putting their trust and their money in the brand. Even more, there are still more and more complaints coming their way. The only thing that VW needs to do would be to guarantee investors and their consumers that they are doing their best to address each concern. And looks like they do.
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