Comment on For Volkswagen, costs of scandal will be piling up

For Volkswagen, costs of scandal will be piling up

[...] the company has set aside 6.5 billion euros ($7.3 billion) to cover the fines and recalls — but it's a fair bet that's only the start. [...] in September, Volkswagen's sales in the U.S. barely grew despite the wider market's double-digit growth, as it had to halt sales of many diesel vehicles. Auto analyst Ferdinand Dudenhoeffer at the University of Duisburg-Essen estimates that Volkswagen could see vehicle sales fall by up to 10 percent globally next year. Earnings could take a bigger hit, as the company may have to hold down prices through purchasing incentives in order to maintain sales. To make matters worse, the scandal comes just as demand is slowing in China, where Volkswagen's brands are heavily exposed. The scandal has caused Volkswagen's shares to drop by about 40 percent, lopping off about 30 billion euros ($33 billion) from the company's market value. The scandal has wiped $10 billion off the value of Volkswagen's $31 billion brand, according to Brand Finance, a London-based firm that values corporate names by estimating what a company would have had to pay to license it if it didn't already own it. Volkswagen's carefully tended brand means it has been able to charge more for the equivalent vehicle than competitors — a key driver of profit in the highly competitive market for basic transportation. Ioannis Ioannou, assistant professor of strategy and entrepreneurship at London Business School, said one thing Volkswagen could do is to invest in emissions testing in collaboration with the U.S.

 

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