VW Shares Up Ahead of Emissions Findings

10 Dec 2015 | Author: | No comments yet »

CO2 scandal affects fewer cars than expected, says VW.

WOLFSBURG, Germany—Shares in Volkswagen AG VLKAY 5.50 % rose sharply in Frankfurt Thursday, following a surge in the shares the day before and ahead of a widely anticipated report on initial findings of the company’s internal investigation into its emissions cheating crisis. Volkswagen shares climbed yesterday as it all but eliminated one front in the pollution scandal that has plagued the car maker for nearly three months, after the company’s suspicions of illegal discrepancies in carbon-dioxide emissions proved unfounded.Volkswagen will publish a blueprint designed to salvage its future today after it was revealed that far fewer cars had been affected by the emissions scandal than was feared.Volkswagen, which has been on a public relations losing streak in recent months, said Wednesday that one of its admitted sins was not as egregious as the company had originally confessed.

Only “slight deviations” were found in a fraction of the 800,000 cars involved in the CO2 investigation, the Wolfsburg-based company said yesterday. Chief Executive Matthias Müller and Supervisory Board Chairman Hans Dieter Pötsch are expected to present preliminary findings of an investigation being conducted by U.S. law firm Jones Day into how and why some employees installed software on up to 11 million diesel-powered cars to manipulate emissions tests.

In September, it admitted to duping regulators by installing technology in 11m cars worldwide that turned on full pollution controls only during tests. While the car firm initially believed up to 800,000 cars were involved, it now estimates just 36,000 vehicles have the wrong CO2 figure and in most instances the error is a matter of one or two grammes. Volkswagen is expected to publish a detailed report outlining what it has discovered so far, but won’t identify those responsible, which would be forbidden under German law. The issue was potentially even more expensive and complicated because it affected petrol cars and there’s no fix, opening it up to compensating customers and tax authorities.

Environmental Protection Agency, which issued an official notice of violation saying that Volkswagen had installed a defeat device to circumvent emissions tests on about 500,000 diesel-powered cars in the U.S. In Ireland only six of the nine models affected are on sale, as Irish dealers don’t stock the affected Polo, Passat Alltrack, or the Golf convertible variants. Whether €2 billion, or a much smaller figure, the money is only a portion of the many billions of dollars Volkswagen could end up spending in repairs, fines and lawsuit settlements over the much bigger scandal it has not been able to explain, or explain away. That is the problem of deceptive software it has admitted installing in more than 11 million diesel cars that was designed to let the cars cheat on emissions tests.

Defeat devices were initially found on 1.6-liter and 2-liter EA189 diesel engines used by Volkswagen’s namesake VW brand, Skoda, SEAT and some Audi NSU 1.45 % vehicles. There is no claim that the number of vehicles affected by this has changed, with 115,917 vehicles in Ireland across the Audi, Seat, Skoda and Volkswagen brands due to be recalled in the coming months over the matter. In November, the EPA disclosed that larger 3-liter engines built by luxury car maker Audi and used on Audi, VW and Porsche vehicles also contained defeat devices.

The company said that after retesting the vehicles, it concluded that its original measurements of fuel economy and carbon dioxide emissions were accurate for the vast majority of the vehicles. In addition to the diesel affair, Volkswagen admitted that it had understated greenhouse-gas emissions and fuel consumption on as many as 800,000 cars, mainly in Europe. On Thursday here in Wolfsburg, Matthias Müller, the Volkswagen chief executive, will hold his first news conference since the wrongdoing came to light and he was promoted to replace Martin Winterkorn, who resigned a few days after the deception was exposed.

A second investigation is looking into allegations of tax evasion connected to Volkswagen’s admission that it provided false information about greenhouse-gas emissions on some diesel and gasoline-powered cars. Prosecutors have identified five people they are focusing on in the tax evasion investigation. “In both of these investigations we have determined there is sufficient cause to continue investigating,” a spokesman for the prosecutor’s office said.

For some engines, Volkswagen said it would install a simple plastic part to improve the flow of air into the engine and reduce emissions of nitrogen oxides — the gases that the deceptive software was meant to reduce during testing, but would allow at much higher levels during on-the-road driving. Though Volkswagen has yet to indicate how it will fix its diesel vehicles in the United States, where emissions standards are stricter, the remedial actions announced for Europe were much simpler and cheaper than expected. “In Europe, Volkswagen has mostly gotten the risks out of the way,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen who specializes in the auto industry and is a prominent critic of Volkswagen.

But investors have taken the small bits of good news this week to drive the company’s stock higher. “We believe further information from the company will prove a positive trigger for the stock as greater transparency should de-risk the equity story,” said Evercore ISI analyst Arndt Ellinghorst. The Kraftfahrt-Bundesamt, the regulatory agency for motor vehicles in Germany, is deliberately starved for resources by political leaders eager to protect the country’s powerful automakers, Mr.

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