Suzuki to Sell Its 1.5% Stake in Volkswagen

26 Sep 2015 | Author: | No comments yet »

New VW chief is ‘walking into a firestorm’.

Suzuki Motor Corp. said it sold all the shares it held in Volkswagen AG to Porsche Automobil Holding SE, following the end of a four-year dispute over a failed partnership with VW.As the new head of Volkswagen (XETRA:VOW3-DE), Matthias Mueller will be overseeing the largest automaker in the world, a sprawling empire of brands and manufacturing facilities stretching from China to North America. The Japanese carmaker will book a 36.7 billion yen ($304.3 million) one-time gain for the July-to-September quarter from the sale, the Hamamatsu-based company said Saturday in a statement filed to the Tokyo Stock Exchange. Environmental Protection Agency earlier this month, VW is said to have installed sophisticated software known as “defeat devices” that only turned on full emissions controls when it sensed official testing taking place, but otherwise emitted 10 to 40 times the legal amount while on the road.

Suzuki sold the 4.397 million Volkswagen shares for an undisclosed amount, and will disclose a revised earnings outlook if it sees the need, the statement said. A day after longtime CEO Martin Winterkorn resigned over the scandal, a member of Volkswagen’s supervisory board said he expects more executives to step down. The veteran Volkswagen executive, who until Friday morning was in charge of its Porsche brand, will now run the entire company, replacing Martin Winterkorn as CEO in wake of the diesel emissions scandal. Porsche sees the purchase of the shares, equal to a 1.5 percent stake, “as a clear commitment to our core investment” in VW, the Stuttgart, Germany-based company said in a separate statement Saturday. Even as the automaker’s board met to approve the 62-year-old Mueller’s promotion, authorities said the company had rigged tests on 2.8 million diesel vehicles sold in Germany, roughly six times as many as have been impacted in the U.S. “He’s walking into a firestorm,” said analyst Joe Phillippi, of AutoTrends Consulting.

But Phillippi stressed that even if Mueller can come up with a “fix-it plan,” VW’s troubles are far from over, “and are going to take years to resolve.” There’s no question that the German automaker—which operates a dozen brands, ranging from entry-level Seat and Skoda to high-line marques Audi, Bentley and Bugatti—has some desperate and immediate challenges. The company also said it was suspending some employees and would reorganize its North America operations after admitting it had cheated on diesel auto emissions tests in the USA through a piece of software. VW officials this week acknowledged the company used special software code, dubbed a “defeat device,” to get its diesel models to recognize when they were undergoing emissions tests. The European Union wants quick answers as to how Volkswagen was able to use stealth software in its vehicles so they could pass lab tests on emission pollution standards. “If we manage to achieve that then the Volkswagen Group with its innovative strength, its strong brands and above all its competent and highly motivated team has the opportunity to emerge from this crisis stronger than before”. BRITAIN: The Vehicle Certification Agency is working with automakers “to ensure that this issue is not industry-wide”, Transport Secretary Patrick McLoughlin said.

Mr Mueller, 62, formerly worked as VW’s head product strategist, and is understood to have substantial backing among the company’s 20-member supervisory board. The ban came as authorities from India to Norway announced new probes, while the U.S. environmental regulator said it would test all diesel auto models. The new CEO “has to put the emphasis on VW customers, whatever the cost,” said Mike Jackson, CEO of the largest U.S. auto retail chain, Florida-based AutoNation.

Meanwhile, the number of investigations of the German automaker expanded again Thursday with confirmation that at least 27 USA state attorneys general have initiated a multi-state investigation of Volkswagen over its representations to consumers over their diesel vehicles. The situation is compounded by the fact that the overall automotive market in China, where VW is the dominant manufacturer, has been slowing rapidly in recent months. As a result, VW could very well lose the king-of-the-hill status it obtained during the first half of this year, when it pushed past Toyota to become the world’s best-selling automaker. While most of the world’s major makers reported gains during a generally strong second quarter, Volkswagen saw a 16 percent drop in its after-tax profit during the second quarter, to 2.73 billion euros. Like key competitors such as Toyota (Tokyo Stock Exchange: 7203.T-JP) and General Motors (GM), VW has developed a handful of so-called vehicle “architectures” that can be shared by a wide range of models and brands.

At the Frankfurt Motor Show, several executives said hybrids, plug-ins and pure electric models would likely begin to replace some high-mileage diesel options.

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