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MENAFN - AFP - 11/01/2017
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(MENAFN - AFP) Woes related to the 'dieselgate' scandal will dog German car giant Volkswagen even after a deal with US authorities to close criminal and civil cases against it, industry experts said Wednesday.

The auto manufacturer said on Tuesday it had a "concrete draft" agreement with US authorities to pay 4.3 billion to settle a criminal investigation and pay civil and criminal penalties over its 'dieselgate' scandal.

The deal -- still subject to approval by VW's supervisory board -- would resolve the final major legal hurdle facing the group in the United States since it admitted in 2015 to outfitting 11 million diesel cars worldwide with software designed to cheat emissions testing.

A 4.3 billion (4.1 billion euro) payment on top of some 17.5 billion in fines and compensation already agreed with authorities, dealers, and consumers in the US would comfortably exceed the 18.2 billion euros VW has so far set aside to cover the costs of the emissions cheating.

"It's a significant financial impact, but this is a good solution," Ferdinand Dudenhoeffer of Germany's CAR automobile research institute told AFP.

The deal is an "important step," agreed Michael Punzet of DZ Bank, but "the financial impact seems higher than so far expected."

Unexpected costs will bite "at a time where the company needs to spend a lot of money into its Strategy 2025," a plan VW announced in late November to focus on electric cars and shed some 30,000 jobs, Punzet noted.

He expects VW to make further provisions of 500 million euros in the fourth quarter of 2016 and 10.5 billion over the whole of 2017.

That would place the total bill for Volkswagen from the scandal around 30 billion euros, while Nord/LB bank analyst Frank Schwope expects the final amount to lie etween 25 and 35 billion.

While Volkswagen can afford such large sums, every euro spent on cleaning up the diesel mess is one less for investment in future technologies like electric and self-driving vehicles.

- Uncertain road ahead -

"This isn't the end. Other costs should still turn up, in Europe but also in the US where complaints are waiting in the wings," Nord/LB's Schwope told AFP.

"Complaints from investors are the biggest problem for Volkswagen in the future," said CAR's Dudenhoeffer.

In Germany alone, shareholders have filed claims seeking damages from VW totalling some 8.2 billion euros.

They say the carmaker failed to inform them about the diesel cheating quickly enough, costing them as the shares plunged in September 2015.

Charges filed in the US on Monday against Oliver Schmidt, a VW executive formerly responsible for US compliance issues, will lend ammunition to the plaintiffs.

US investigators believe VW executives, including the German board around former chief executive Martin Winterkorn, knew of the cheating in July 2015 -- two months before finally admitting to it publicly -- but chose to say nothing.

German investigators are probing Winterkorn, former finance director Hans Dieter Poetsch -- now supervisory board chairman -- and VW brand chief Herbert Diess on suspicion of holding back information from investors.

One group unlikely to see any benefit from VW's admission of guilt in the US is consumers in Europe, where authorities have less power to compel the firm to offer buybacks or compensation.

Volkswagen is refitting affected engines to bring them in line with EU emissions standards, but has rejected calls to offer European customers the same payouts their US counterparts enjoyed.



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