Will VW Soon Recover from the Emissions Scandal?

Posted 4/12/17

Ever since the scandal surfaced, pundits across the board had predicted VW’s emissions scandal was the dinosaur killing meteor that would wipe the car company from the face of the earth. It was discovered the company had programmed hidden software allowed  it to cheat on its emissions tests for years, prompting recalls and a settlement expected to cost the company $14.7 billion in the US alone, according to the Wall St. Journal.

But now there is a possibility the company may be able to settle with US regulators for about $3 billion. Anything north of $5 billion would be short-term negative, Arndt Ellinghorst, an Evercore ISI Analyst who holds a buy rating on VW, recently told CNBC. It would also break the current record fine under US federal environmental laws, set by BP’s charge for the Deepwater Horizon oil spill.

A Sales Windfall

Yet the company has made a surprising come back thanks to a cost cutting plan and profit turnaround, buoyed by positive sales data in Europe.

“If you’re still unconvinced that Volkswagen is close to burying its diesel sins in the dust you might be better persuaded by the same logic drawing bargain hunters to the high street this week,” CNBC reported. “VW is trading near six times 2017 earnings, compared to German rivals BMW and Daimler, which trade closer to 8 and 9 times full-year earnings.”
Our VW mechanics aren’t surprised. VW’s low repair needs and quality braking systems have made it a reliable family car for generations. In the end, the VW emissions scandal should prove to be a correctable mistake that could ultimately make the company healthier in the long run.

MENU