Volkswagen punished by stock market for cheating on emission tests (down about 20%)

VW stock chart September 21, 2015
Screen capture Google Finance

1/5 of the company's value has disappeared in a puff of smoke

The shocking revelations last week (which we covered here) that the Volkswagen, which is part of the larger Volkswagen Group, now the world's biggest automaker after passing Toyota earlier this year, had been cheating on emission tests with a piece of software that only ran pollution controls fully when the car detected that an emission test was being done (very scummy if true).

Regulators at the federal and state level, as well as possible in other countries, will take a while to finish their investigation and impose fines, but the stock market was swift in its punishment of the company. VW's stock fell by over 20% in early trading in Europe, at one point wiping out about 16 billion euros (US$18 billion) in market value.

The company's stock was already having trouble. As you can see below, it is now down about 45% over the past 6 months...

VW stock chart September 21, 2015Google Finance/Screen capture

Don't mess with the EPA

The direct cost of this scandal to the company could be astronomical. Based on the number of vehicles affected and the per-vehicle potential fine, the German company could see its wallet become lighter by about $18 billion. But they've also had to stop sales of the models involved in the scandal (for a list, see the bottom of this article), which will also cost them. The recall on so many vehicles will also be expensive, as will be the hit to the company's brand; many people bought VW TDIs because they were sold a more environmentally friendly "clean diesel". How will VW regain people's trust after this? It could take a while...

Oh, and let's not forget that Criminal prosecution is also possible... And now that the company is under the spotlight, other problems might be uncovered.

The CEO said he was “deeply sorry” for breaking the public’s trust and that VW would do “everything necessary in order to reverse the damage this has caused.”

VW Jetta TDI dieselFlickr/CC BY 2.0

Tags: Air Pollution | Air Quality | Transportation


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