There has been a great deal of press coverage in recent days about the Volkswagen Group’s ongoing disasters as a result of the diesel emissions scandal. To put this into some kind of perspective the shares were worth $285 in March, that drifted down to around $187 a month ago. This morning they hit $96, some of that is due to currency fluctuation, but it is clear that many investors have simply baled out. The value of the company has fallen from $110 billion at the end of last year, to just $50 billion. That is a big hit, but the real question is how much the crisis will cost the company in cash terms.
This is hard to calculate because it is difficult to know how the crisis will affect the number of buyers and their faith in the VW brand. The last few days have been painful for automotive parts suppliers with the markets driving down the value of stocks such as Tenneco, BorgWarner, Delphi Automotive and Continental because there is a fear that consumers will turn their backs on controversial diesels and look instead to hybrids and electric vehicles when it comes to buying new machinery. The analysts at Credit Suisse have tried to calculate the likely damage, taking into account all the various elements involved, including the costs of recalling the cars involved, paying all civil and criminal damages, including those of investors, who are already sueing for compensation for the loss of share value, and all demands for the repayment of subsidies and, of course, the likely impact of the scandal on the VW brand. Their conclusion was that the shares will probably fall another 20 percent in value and that the final cost of the affair will be between $25.6 billion and $87 billion.