Volkswagen Financial Services announced it took a massive write-down to cover the depreciation of the cars in the wake of the emissions scandal.
The effects of Volkswagen’s cheating scheme on the emissions tests are forcing the company’s finance arm to cover a potential decline in the residual value of cars. The September disclosures have evidently reflected on the resale values of VW’s models, thus making the Financial Services division – which issues leasing contracts to customers – adjust the presumed resale value of its fleet of leased cars and take an extraordinary writedown of 353 million euros (391 million dollars). “We created extensive reserves on the basis of the leasing portfolio so as to be prepared for any possible decline of the residual values,” CEO Lars Henner Santelmann said after the VW subsidiary published full-year results.
To cover the impact on its business in the United States, VW Credit, which is separate from VW Financial Services AG, set aside an additional 96 million euros (106.4 million dollars) in provisions. However, extra finances will probably be necessary as the automaker is still far away from closing a deal with the US regulators and it is yet unknown if it has to buyback the fleets that do not meet current emissions standards, the company said.
In addition to the dieselgate scandal, VW Financial Services is seeing headwinds in emerging markets, where demand has slumped. Risk costs have been hiked to 1.38 billion euros in 2015, from 680 million euros in the year-earlier period, mainly due to lower demand in Russia, India and Brazil.