BERLIN (AP) — Shares in Volkswagen are making solid gains after the German automaker said that it’s in advanced talks with U.S. authorities on a settlement in its diesel emissions scandal. Volkswagen shares were up 3.9 percent on the day at 151.80 euros ($160.68) in early-afternoon Frankfurt trading Wednesday.
The Volkswagen logo is seen on the grill of a Volkswagen on display in Pittsburgh. The imminent criminal plea deal between Volkswagen and U.S. prosecutors in an emissions-cheating scandal could be bad news for one group of people: VW employees who had a role in the deceit or subsequent cover-up. VW on Tuesday, Jan. 10, 2017, disclosed that it is in advanced talks to settle the criminal case by pleading guilty to unspecified charges and paying $4.3 billion in criminal and civil fines, a sum far larger than any recent case involving the auto industry.
Must Pay Fine
The company said Tuesday night that a draft settlement with the U.S. Department of Justice and U.S. Customs and Border Protection would see Volkswagen pay $4.3 billion in criminal and civil fines. It said that its management and directors would consider the settlement «in the very short term.»
The automaker said the settlement is expected to incur a cost «that exceeds the current provisions.» Volkswagen already reached a $15 billion civil settlement with environmental authorities and car owners in the U.S.
Boom in China
— Booming business in China helped push Volkswagen to a 3.8 percent sales increase in 2016 — despite lawsuits and criminal investigations over its cars that cheated on emissions tests. Dr. Herbert Diess, chairman of the Volkswagen brand, poses with the I.D. Buzz all-electric concept van, at the North American International Auto Show, Monday, Jan. 9, 2017, in Detroit(Se bottom picture). Volkswagen owns the Swedish truck producer Scania AB in the Nordics, reports Nordic News.
Volkswagen sold 10.31 million cars across all of the company’s brands, which include Audi, Porsche and Skoda. Sales in China grew 12.2 percent for the full year, to 3.98 million. The results strengthened Volkswagen’s bid for the title of world’s largest carmaker against the sales leader from 2015, Toyota. The Japanese automaker led with 10.15 million, followed by Volkswagen with 9.93 million and U.S.-based General Motors with 9.8 million.
Very strong december
Volkswagen was helped by a strong December. Global sales jumped 11.8 percent during the month, with stellar growth of 18.6 percent in China, the company’s biggest single market. Volkswagen has agreed to a $15 billion settlement with U.S. authorities and car buyers, but is still solving its legal issues. It has a criminal penalty pending and an executive formerly responsible for U.S. environmental compliance was arrested in Florida over the weekend.
Sales fell by 2.6 percent for the year in the U.S., where the scandal first broke in September 2015. The U.S. Environmental Protection agency said Volkswagen had illegally installed software that turned on pollution controls when cars with diesel engines were on test stands. During normal driving, the emission controls were turned down, improving performance but violating limits on health-damaging nitrous oxides. Some 11 million cars worldwide were sold with the illegal software.
Owns Swedish Scania
Yet even the U.S. market showed signs of a rebound, with a robust increase of 16 percent in the last month of the year. The U.S. is a much smaller market for the company than China, a factor which helped limit the global sales damage.
Volkswagen still faces serious trouble from the scandal. It has yet to agree on a criminal penalty with the U.S. Justice Department that could run to several billions of dollars. In addition to the executive arrested in Florida, Oliver Schmidt, engineer James Liang has pleaded guilty to conspiring to defraud regulators and customers. German prosecutors are investigating as well. Investors have filed suit in Germany seeking 8.2 billion euros ($8.62 billion) in damages. Volkswagen owns the troch producer Scania in Sweden.This story has been written by James Liang for Associated Press.
Hi
If you are looking for expert comment on BMW building a new plant in Mexico Christian Stadler, of Warwick Business School, is Professor of Strategic Management and has researched the car industry.
Professor Christian Stadler said: «BMW is right to carry on with its plans in Mexico and there are four good reasons why. First, although Trump has sounded very aggressive in his statements, especially on Twitter, we still do not know if this will translate into policy. When you look at the Ford decision, that really fitted in with its wider agenda, it was more efficient to extend production in the US.
«Plus, once Trump looks at the details of the car industry, he will see that 40 per cent of the components of cars manufactured in Mexico are imported from the US, so imposing tariffs on car imports would also hurt the US economy.
«Thirdly, if Trump does become aggressive on trade he has to expect a reaction. For instance BMW manufactures its SUVs in the US, and its biggest market for that car is China, which may counter any tariffs on its exports with tariffs of its own.
«Finally, economically Mexico is just too good to give up on for car manufacturing. It has free trade agreements with 40 countries globally, so even if there is a downturn in the US there are plenty of other markets car companies can facilitate with production in Mexico.
«On average the cost of a worker in Mexico is $8 per hour, while in the US it is $60, so production is so much cheaper in Mexico manufacturers will think twice about moving production from there even if Trump does take action.
«Trump is going to get headlines with his statements, but it might not turn into a policy that will work.»To interview Christian Stadler contact me.
Yours friendly Christian.Stadler@wbs.ac.uk
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