As dieselgate scandal fades, VW races back into profit

Carmaker reports profit of 5.1b euros for 2016, recovering from 1.6b-euro loss

WOLFSBURG: German auto giant Volkswagen (VW) on Friday said it raced back into the black in 2016 as car sales hit an all-time high, in the latest sign of its “dieselgate” scandal fading into the rear-view mirror.

But the costly fallout from the emissions cheating crisis also prompted the firm to announce a cap on executive earnings, in a major departure from Volkswagen’s notoriously generous pay packages.

Under the new rules, pay-outs will be more closely linked to the group’s financial performance with the chief executive’s remuneration limited to 10 million euros ($10.5 million).

Other board members will see their annual pay capped at 5.5 million euros, VW said after a meeting of the supervisory board at its Wolfsburg headquarters.

The changes come as VW aims to clean up its image after it admitted 18 months ago to having installed software in 11 million diesel engines worldwide that could dupe emissions tests.

In a sign that the tide is turning, the carmaker reported a net profit of 5.1 billion euros ($5.4 billion) for 2016, recovering from a stinging 1.6-billion-euro loss in the aftermath of the cheating revelations in 2015.

“While the past fiscal year posed major challenges for us, despite the crisis the group’s operating business gave its best-ever performance,” Chief Executive Matthias Mueller said in a statement.

The VW group - which includes the brands Porsche, Audi and Skoda - beat analyst expectations with record revenues of 217.3 billion euros in 2016, up nearly 2% on the year before.

Underlying or operating profit rose to 7.1 billion euros from a loss of 4.06 billion in 2015, it said.

Despite the damage to its reputation because of dieselgate, the group delivered a record 10.3 million vehicles in 2016, driven by strong demand in Europe and the Asia-Pacific region.

The result meant VW overtook rival Toyota to become the world’s top selling carmaker.

For 2016, the group said it planned to raise dividend pay-outs from 0.11 euros to 2 euros for ordinary shareholders and from 0.17 euros to 2.06 euros for preferred shareholders.

Looking ahead, VW said it expected the upward trend to continue in 2017, pencilling in a 4% rise in revenues while car sales look set to increase moderately.

“As the figures show, Volkswagen is very solidly positioned in both operational and financial terms. This makes us optimistic about the future,” Mueller said.

But the company is not out of the woods yet.

The dieselgate admissions triggered mass recalls and a sea of legal complaints, pushing VW into the red for the first time in more than 20 years in 2015 due to the provisions it had to set aside to cover costs of the crisis.

The group on Friday said it added another 4.4 billion euros to the pot in the last quarter of 2016, bringing the total amount set aside for refits, buybacks, fines and compensation to 22.6 billion euros.

Published in The Express Tribune, February 26^th, 2017.

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