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Automobile industry

Volkswagen CEO Resigns Amid Emissions Scandal

Strategic Insights

— 2 min read

As the world's top-selling carmaker, Volkswagen has always been known for its reputation for trustworthiness, which has taken decades to build. However, this trustworthiness has been suddenly dented by a scandal that has wiped out billions in market value and raised the specter of criminal investigations and billions more in fines. The smog-test trickery, which has affected 11 million diesel cars worldwide, has forced CEO Martin Winterkorn to resign, with the company promising to embark on a "credible new beginning."

Key Takeaways:

  • The scandal has wiped out nearly 25 billion euros (around $28 billion) in market value, with the share price closing up 6.9 percent at 118.90 euros, but still having a long way to go to recoup this week's losses.
  • Volkswagen has set aside 6.5 billion euros to cover the costs of the scandal, which includes installing "defeat devices" in 482,000 cars sold in the U.S. and 11 million diesel cars worldwide.
  • The company has come under intense pressure since the U.S. Environmental Protection Agency revealed that the scandal could lead to fines of as much as $18 billion.
  • Germans, particularly the government, are seeking to limit the impact on the country's economy, with Economy Minister Sigmar Gabriel cautioning against casting doubt on the quality of Volkswagen as a whole or the rest of the country's auto industry.
  • Economists are raising concerns about the impact on German growth, with Carsten Brzeski, chief economist at ING Germany, stating that the ongoing refugee crisis and the "Volkswagen shocker" pose new risks.
  • Volkswagen's biggest bank, Deutsche Bank, has already lowered its forecast for the main German stock market index, the DAX, due to the impact of the scandal.
  • The prosecutors' office in Braunschweig has confirmed that it is weighing an investigation of Volkswagen employees, while other governments and law firms have begun their own inquiries.

Statistics:

  • The market value wiped out by the scandal is nearly 25 billion euros (around $28 billion).
  • The share price of Volkswagen closed up 6.9 percent at 118.90 euros.
  • Volkswagen has set aside 6.5 billion euros to cover the costs of the scandal.
  • 482,000 cars sold in the U.S. and 11 million diesel cars worldwide are affected by the scandal.
  • The maximum fines that Volkswagen could face are up to $18 billion.
  • The ongoing refugee crisis and the "Volkswagen shocker" pose new risks to German growth.

Sources:

  • Winterkorn's statement (no date)
  • Huber's statement (no date)
  • Weil's statement (no date)
  • Pylas (no date)
  • Associated Press (no date)
  • "Made in Germany" by Ulrich Grillo (no date)
  • Carsten Brzeski's statement (no date)
  • Deutsche Bank's forecast (no date)
  • ING Germany's forecast (no date)

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