Newspaper article International New York Times

VW Financial Services Lowers Its Profit Outlook ; Emissions Scandal Costs Are Expected to Rise for Carmaker's Banking Arm

Newspaper article International New York Times

VW Financial Services Lowers Its Profit Outlook ; Emissions Scandal Costs Are Expected to Rise for Carmaker's Banking Arm

Article excerpt

The emissions scandal "intensively challenged" Volkswagen and its in-house bank, the unit's chief said, and the unit expects costs to go up.

Volkswagen's in-house bank said on Tuesday that profit was likely to fall this year because the automaker's diesel emissions scandal would increase the interest the company must pay to raise money from financial markets.

The unit, Volkswagen Financial Services, reported its financial results on Tuesday, saying it had subtracted about 450 million euros, or about $500 million, from 2015 earnings after vehicles leased to customers lost more value than expected, in part because of the scandal. The unit still reported a net profit of EUR 1.2 billion for last year, a 35 percent increase from the previous year.

The financial hits were a result of the turmoil that has enveloped Volkswagen since it admitted widespread cheating on emissions tests going back years. Volkswagen Financial Services has been temporarily unable to issue bonds in the United States or Europe because of its parent company's problems, executives of the unit said on Tuesday at a news conference in Frankfurt.

The emissions scandal has "intensively challenged the entire Volkswagen Group and therefore Volkswagen Financial Services as well," said Lars Henner Santelmann, chief executive of the banking unit.

Volkswagen Financial Services is one of Europe's largest banks, considered significant enough to be supervised directly by the European Central Bank. It has also been a major profit source for Volkswagen, and a way to promote sales by providing customers with money to buy or lease Volkswagen vehicles.

Volkswagen's financial reporting has effectively been delayed while the company negotiates with the United States government about the fines it must pay after admitting last year that 11 million cars, including about 600,000 in the United States, were equipped with software that generated low emissions only when the cars were being tested.

At other times Volkswagen diesels emitted many times the allowed amounts of nitrogen oxide, a pollutant linked to serious lung ailments and premature death.

Volkswagen has pushed back publication of its 2015 financial results to the end of April, from March 10, which makes it impossible for the financial services unit to prepare the documents required to sell bonds in the United States and Europe, company executives said. …

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