Meanwhile other European countries goes up on the matter, Germany is not on its best shape for the market today. DAX fell of 0.7% today, meanwhile Euro STOXX 50 were up of 0.4% today. Because of what? Probably the Volskwagen scandal. The value of the Volskwagen company gone down of $18 billion and its stock today is at -20% compared to yesterday. U.S. Environmental Protection Agency found that the car emissions they claimed and showed for certification was really mislead, since the car was doing as much as 10 to 40 times more air pollution than claimed in the test. The fine they risk from the EPA is around $37,500, or $18 billion.
https://news.vice.com/article/volks...cause-it-allegedly-cheated-on-emissions-tests Here's the rest of the story...
VW is going to take a huge hit in the medium term through direct retrofitting costs on 400,000 odd vehicles and possible fines. But I am pretty sure they will make it through as consumers have short memories. If I was purely a for-profit investor I would be buying VW right now. But as an environmentalist I am just too disgusted to consider it.
I guess you will have to forget the 400,000 number, since Volkswagen revealed today that it concerns as much as 11,000,000 of cars (yes, 11 million), and it involves many (if not all?) brands of the group, namely Skoda, Audi, Porsche, Seat. They are currently reserving €6.5 billion because of the scandal on their Q3 budget and they loosed *35%* of their capitalization in 2 days. That's worst than a fall. The CEO of Volkswagen US said "We totally screwed up". Meanwhile, Italy, South Korea are doing investigations as well. Volkswagen expected, before the problem, that the car sells of 2015 would be stagnating comparing to 2014. To summarize the problem, it's now clearer: basically, meanwhile the U.S. EPA's was testing the vehicle, a special mode was triggered by the engine controller's to control the engine in a way it respects the EPA rules. However, in normal usage, the engine controller applied a very different behavior, leading to this 10-40 times pollution increase. In general, we estimate a difference of 40% already on all vehicles between the results in test and the results in real-world conditions in 2014. It was only of 7% in 2001. This is because auto manufacturers optimize the engine for the metrics of the test, but they don't try to cheat fully the test by applying different behaviors. Volkswagen done the latter, however, hence the EPA's possible fine and the investigations. The thing is other auto manufacturers goes down as well. Much like if the markets feels like the whole automotive industry is more risky right now. You feel like they are right to think so? I know some European countries says they want to investigate all automobile manufacturers sold in Europe to calm down the consumers.
I'm sorry to hear of Volkswagen's plight. All along I thought it was earning well because there is a plan, according to a recent article in a motoring magazine, that Volkswagen will claim a spot in the Philippine market. But with that exhaust problem particularly the emission of pollutant, I guess it would be difficult for Volkswagen to get up and stand on its feet for a few years. Even if we are talking only of 400k vehicles and not 11 million, it's not only Volkswagen that is affected but may be Germany's economy and that of Europe as well.
Ok, call me crazy, assuming that the shares are still going to drop in the following weeks, at what point would you throw in some money?
111kg, the 26% pullback today puts the share price back to the price levels of 2012. I've not yet looked at financials. I recall a general rule of thumb of acquiring a position in these kinds of cases, aside from considering your risk tolerance and time horizon, is to nibble at it. Purchase a small percentage, say 10-20%, of the total amount you are willing to risk and do so over time on future dips at intervals that present themselves. In this case, I thought I read somewhere today that the company has already set aside $7bn but in the USA fines alone may be $18bn. Whatever the numbers for fines and remediation are now, they are bound to go up as more countries jump on the bandwagon, and I would expect there will be future buying opportunities as news presents itself to the markets and investors. HTH. YMMV.
I would bet on VW making it through. Other auto makers hid faults that flat out horrifically killed up to 100 people and they are doing fine. VW lived down being started by azis. VW is in the 'too big to fail' basket for Germany. Basically the German GM.
From Bloomberg's live Trending Markets show on the air as I write this, VW contagion has now spread to China, 2 recalls reported today, and Japan. 11 mil VW vehicles are affected. The VW Board of Directors are expected to meet on Wednesday. Catch a falling star, err, knife.
They maybe not get fines for the 11,000,000 cars, because currently each country (except maybe Europe) would have to investigate separately on the matter to fine them, but 11 millions of car will be repaired, that's what Volkswagen announced. So that's it, 11 millions cars are involved, because they will repair it. The German economy will be effected, I am convinced of that, and given European Union economy is mainly handled by few countries like Germany and France, founding countries of the European Union, I guess the whole EU is affected. But I don't think they will have a big big problem. The most worrying one is that the whole automotive industry is loosing capitalization right now with -9% meanwhile they're not implied. You're a bit crazy! Honestly, I think you should hold and not buy yet for few days, at least. I would rather wait weeks but I guess Volkswagen is going to go down and even more down as the investigation is continuing and countries will announce the astronomical fines because if US is doing $18 billion for 400,000 cars, imagine in Germany where the shares of Volkswagen is probably higher. I would bet as well, because the company is there since years and feels like to have some cash just in case. But the company will suffer, and I feel like layoffs will come quickly.
