Volkswagen Morale Still Strong

Sentiments proved resilient despite the scandal at the major automaker Volkswagen, which recently admitted equipping cars with software that enabled them to evade U.S. emissions tests. Despite the company facing heavy fines and the possibility of lost sales, business morale is still high. 
The Volkswagen scandal broke out last year when a clean energy advocacy group that had raised questions about emission levels in diesel vehicles commissioned a West Virginia laboratory. For more than a year, VW argued that it had been doing nothing wrong. Only recently did VW admit that it had installed “defeat devices” to get around emissions standards.
Volkswagen has announced a recall of 8.5 millions vehicles in Europe to remove the software, including 2.4 million in Germany, roughly 1.2 million in the U.K. and nearly one million in France. U.S. regulators have already ordered the company to recall nearly 500,000 vehicles. The recall in Europe will begin in January 2016. U.S. regulators are looking into a second piece of software that Volkswagen used to control emissions. They are studying what the software does, how it may affect vehicle performance and whether it may have been used to manipulate emissions. Volkswagen said it has withdrawn its application to register 2016 diesels in the United States.
Volkswagen is planning a massive savings to cope with the costs of the scandal; recalls, fines, compensation and lost sales. It has set aside $7.3 billion, but Credit Suisse analysts estimate the total cost to be about $87 billion in a worst-case scenario.
Remarkably, there has been an interesting reaction to the recent series of uncertainties and turmoil. Carsten Brzeski, chief economist at ING stated, “One should not interpret too much in a single confidence indicator but today’s Ifo (Information and Forschung (research)) reading suggests that the German business community is filing the Volkswagen scandal as a one-off and also shrugs off the risk from a possible Chinese and emerging markets slowdown.”
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Reinhard von Hennigs
www.bridgehouse.law