JOIN US The recent controversies surrounding Volkswagen (VW) may have wiped out a whopping €22.3 billion of the company’s enterprise value (EV), according to a report by Goldman Sachs.
“VW’s share price decline through the period September 18-October 15, from €162.4 to €102.8 has removed €22.3 billion of market value from VW’s EV,” Goldman Sachs said in the report.
VW’s ‘Dieselgate’ controversy arose on September 18 with the Environmental Protection Agency (EPA) publicly delivering a violation notice to VW and requiring the firm to publicly admit to designing and installing software designed to cheat emissions tests in some 11 million vehicles.
The episode has seen VW’s pref shares fall 37 per cent, triggered the resignation of the CEO and the suspension of three brand R&D heads, and seen the company explaining itself to governments and regulators. It has also raised global scrutiny on vehicle emissions, according to the report.
The report goes on to state that products recalls and repairs for the company could lead to fixed costs of around €5.5 billion.
“Outside the US, vehicles require similar fixes to those inside the US, under recall, but in greater numbers (10.4 mn units), leading to a greater estimated fixed cost of €5.5 billion (assuming same per-car fix cost),” Goldman Sachs said.
Customers whose cars are fixed under recall, but which suffer a fuel-efficiency penalty as a result, may be able to claim compensation.
Assuming a total useful life of 120,000 miles per car, each one per cent miles per gallon (mpg) difference translates to a headwind of €1.6 billion, Goldman Sachs added.
‘Costly’ scandal
Volkswagen share price declines through the period September 18-October 15
Goldman Sachs report says product recalls and repairs could lead to fixed costs of €5.5 billion
Dieselgate controversy has raised global scrutiny on vehicle emissions