Volkswagen were already trying to boost thier US sales in a region where they struggle to get a big share of the market. New product launches, improved quality, lower prices, improved efficiency while being more appealing these were the traditional routes to increasing market share.
The revelation and subsequent admittance to developing a so called “defeat device” which disguises the amount of pollution being emitted from its vehicles is already doing more harm to VW and more could be on the way.
The biggest harm so far isn’t the potential of facing an $11bn dollar s fine, nor is it VW executives being jailed for fraud, no. The biggest damage VW could face and indeed has already suffered is a severe dent in the company’s share price which has fallen by 18 percent and it continues to fall as we speak.
Stock market’s operate on a very simple basis and that basis is founded upon confidence and many investors feel VW will be fined into oblivion by US regulators who dislike it when a guest breaks anti-pollution laws designed to protect the health of its citizens.
The 18 percent share slide represents a few billions off VW’s stock market value which is equivalent to 14bn euros. VW has already set aside around 6.5 billion euros to pay for fines and private prosecutions. Nearly 500,000 VW vehicles sold over a six year period in the US are affected.
But that’s not the end of the story, VW say the actual figure world wide could total around 11 million. And that’s not the end of the story because country’s all over the world where VW’s are sold are also launching regulatory inquires with large fines sure to follow.
The boss of VW US admitted, in rather simple terms, “we totally screwed up” in the use of software deception to pass emissions tests.
Volkswagen generate around 197 billion euros a year with a net operating profit of around 21 billion euros. The company has a market value of $94 billion dollars and its assets are valued at around $400 billion dollars.
Volkswagen can ride this storm quite easily, naturally it issued a profits warning for this year, but the real damage done is to its reputation and no amount of money or PR can repair that immediately.