VW may be forced to sell assets to cover the costs of the emissions scandal image

Even if Volkswagen set aside 16.2 billion euros (18.4 billion dollars) to pay for the cheating scandal, the company said the provisions may not be enough.

The diesel scandal made Europe’s biggest automaker to report its biggest ever operating loss, as it provisioned 16.2 billion euros for recalls and buybacks of the affected cars. Furthermore, another 7.0 billion euros has been set aside to cover the legal risks worldwide. However, Volkswagen said it was getting ready for the worst scenario that would imply selling assets if the emissions-related costs were to escalade further. Under the “risks form the emission issue” chapter tucked away under its 400+ page full year report published on Thursday, the company said that “the funding needed to cover the risks may lead to assets having to be sold due to the situation and equivalent proceeds for them not being achieved as a result.” Volkswagen noted that demand may decrease, margins in the new and used car business may fall because of lower market prices and funds tied up in working capital may increase temporarily.

VW Group incurred an operating loss of 4.1 billion euros (4.65 billion dollars) last year, while the overall earnings before tax in 2015 came to a negative 1.3 euros. As for the company’s core brand, operating profit before special items fell from 2.5 billion dollars to 2.1 billion dollars, causing the return on sales to fall to 2 percent from 2.5 percent, way below a 6 percent target, as “positive effects from exchange rates and from the efficiency program were unable to compensate for negative ones arising from the markets in Brazil and Russia as well as from market support measures linked to the emissions issue,” VW said.

Via Reuters