RichardJensen Posted April 28, 2016 Share Posted April 28, 2016 http://www.nytimes.com/2016/04/23/business/international/volkswagen-loss-emissions-scandal.html?action=click&contentCollection=International%20Business&module=RelatedCoverage®ion=Marginalia&pgtype=article Volkswagen reported a record loss for 2015 on Friday as it set aside more than $18 billion to cover the cost of fines, legal claims and recalls in the United States and other countries related to diesel emissions cheating. The figures show that the scandal will cost the company more than it previously acknowledged. But the sum was also less than some estimates for the cost of the United States settlement, which ranged as high as $30 billion. Volkswagen said it lost 5.5 billion euros, or more than $6.2 billion, last year, compared with a profit of €2.5 billion in 2014. The company increased the amount of money it was setting aside for the scandal to €16.2 billion. That was up from €6.7 billion previously. As a reminder, the entire VW group had about $24B on hand in cash and $29B in liquid assets at the end of September, 2015. I can't imagine that their cash flow the last three months of 2015 was particularly good. Quote Link to comment Share on other sites More sharing options...
jpd80 Posted April 28, 2016 Share Posted April 28, 2016 almost like they are oblivious of of just how big this liability is on the company.... Quote Link to comment Share on other sites More sharing options...
twintornados Posted April 28, 2016 Share Posted April 28, 2016 (edited) Sergio is rubbing his hands with glee....."Finally....a merger partner..." Edited April 28, 2016 by twintornados Quote Link to comment Share on other sites More sharing options...
sullynd Posted April 28, 2016 Share Posted April 28, 2016 Wonder if we'll see them sell/spin off some of the brands... Porsche/Bentley/Lambo spin off? Quote Link to comment Share on other sites More sharing options...
atomcat68 Posted April 28, 2016 Share Posted April 28, 2016 Bentley and Lambroghini would probably be the easiest to spin off. I doubt they'd do it. They would be more likely to dump Ducati or the commercial truck division like Scania or MAN. Lambo would probably be the car division they would get rid of first. Everything else is so tied into VW and uses so many common parts, I can't see how they'd untangle it enough to make a sale possible. Quote Link to comment Share on other sites More sharing options...
bzcat Posted April 28, 2016 Share Posted April 28, 2016 Wonder if we'll see them sell/spin off some of the brands... Porsche/Bentley/Lambo spin off? We are not there yet. And besides, those brands are probably hugely cash flow positive so that would be the wrong ones to spin off. If it comes to that, the brands that get unloaded will be cash flow neutral or negative ones like Seat and Ducati. And maybe either Scania or MAN... VW probably doens't need overlapping truck and bus brands that are heavily focused in the same region. $18 billion is a charge on the P&L not actual cash going out the door. VW Group should be able to sustain the buyback and recalls with cash flow generated next few years... assuming sales doesn't fall off a cliff. But all that money going towards cleaning up dieselgate will mean delays in future products. I'm expecting anywhere between 18 to 24 months delay on all upcoming volume models replacements. Quote Link to comment Share on other sites More sharing options...
NLPRacing Posted April 28, 2016 Share Posted April 28, 2016 Wouldn't it have cost less than $18,000,000,000.00 to develop an actual "clean" diesel? 2 Quote Link to comment Share on other sites More sharing options...
bzcat Posted April 28, 2016 Share Posted April 28, 2016 http://www.nytimes.com/2016/04/23/business/international/volkswagen-loss-emissions-scandal.html?action=click&contentCollection=International%20Business&module=RelatedCoverage®ion=Marginalia&pgtype=article As a reminder, the entire VW group had about $24B on hand in cash and $29B in liquid assets at the end of September, 2015. I can't imagine that their cash flow the last three months of 2015 was particularly good. They haven't spent any real money on dieselgate yet. The cash flow will look really bad when the buyback starts and when VW has to pay the EPA fines. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted April 28, 2016 Author Share Posted April 28, 2016 $18 billion is a charge on the P&L not actual cash going out the door Correct. Right now it's just an impairment. But the size of this is so significant that even if they generate, say, $4B in free cash flow every year for the next four years, they're still going to be in worse shape than they are now. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted April 28, 2016 Author Share Posted April 28, 2016 (edited) They haven't spent any real money on dieselgate yet. The cash flow will look really bad when the buyback starts and when VW has to pay the EPA fines. I assumed that cash flow would be terrible in the 4th Q because their sales were going to go through the toilet, and their SG&A spend on advertising, incentives, etc., per unit was going to skyrocket. For instance, if they'd booked revenue from diesels shipped to US outlets, they had to unwind everyone of those transactions, and that's cash out that they'd previously booked in. It looks like they burned through about $3B in the 4th quarter, based on the difference in cash on hand from Q3 to Q4. See p. 197 of the annual report: http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2016/04/Y_2015_e.bin.html/binarystorageitem/file/Y_2015_e.pdf Edited April 28, 2016 by RichardJensen Quote Link to comment Share on other sites More sharing options...
bzcat Posted April 28, 2016 Share Posted April 28, 2016 That's fair assumption... while sales haven't fallen off the cliff yet, incentives is probably up in every major markets for VW. Plus you figure the lease and loan portfolio is worth a lot less (some of it will be subject to cancellation without penalty) which means they are getting less free cash flow from them in the next few quarters. Quote Link to comment Share on other sites More sharing options...
blwnsmoke Posted April 29, 2016 Share Posted April 29, 2016 So a question on what you this scenario. My brother in law has a 15 Passau tdi on a low mileage lease. His plan was to do a low mile lease and buy it out after and he is currently going to be way over his mileage (he didn't care). Now that they will be offering to cancel leases, I wonder what they are going to do for people who are over their miles... Quote Link to comment Share on other sites More sharing options...
bzcat Posted April 29, 2016 Share Posted April 29, 2016 So a question on what you this scenario. My brother in law has a 15 Passau tdi on a low mileage lease. His plan was to do a low mile lease and buy it out after and he is currently going to be way over his mileage (he didn't care). Now that they will be offering to cancel leases, I wonder what they are going to do for people who are over their miles... My guess is he will get prorated on his allowable mileage at the time of lease cancellation so he will pay the excess mileage amount up to that point but VW will let him off the hook on remaining lease payments. Quote Link to comment Share on other sites More sharing options...
blwnsmoke Posted May 9, 2016 Share Posted May 9, 2016 So an interesting conversation on one of the superduty diesel sites. An owner just reported that he just received a letter from the DMVA saying that his truck has not had an emissions recall Ford put out (has to do with EGT sensors). They stated that he will not be able to register his truck until he gets it done and provides proof. Problem is, he is fully deleted so he has to put all the emission crap back on, get reflash ed and then delete again. So to me, this serves as proof of what will happen with all the TDIs in emission compliant states. Quote Link to comment Share on other sites More sharing options...
jpd80 Posted May 10, 2016 Share Posted May 10, 2016 What this does is unwind all the plans and hopes of expansion in North America, I wonder what impact that will have on future earnings projections, larger than dieselgate????? Quote Link to comment Share on other sites More sharing options...
MKII Posted May 10, 2016 Share Posted May 10, 2016 Scrap VW America and replace with Skoda America Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted May 12, 2016 Author Share Posted May 12, 2016 Scrap VW America and replace with Skoda America Hah! It's not a Volkswagen! It's a Skoda! A completely different thing!! Quote Link to comment Share on other sites More sharing options...
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