Not saying it is right but that's how these things seem to go. Bet those peanut guys are wishing they had a car company now.
Volkswagen Admits to Cheating US Emissions Tests
- Thread starter Sir Matt
- Start date
The GM issue could be construed as negligence on the part of GM rather than setting out to break the law, as VW have done. The GM penalty was also done under a different AG. As we've seen with Lynch's dealings with FIFA and a recent policy issued by DOJ, she's going after corporations and officials rather than trying to avoid legal expenses that typically allow companies to mitigate penalties by threatening long legal processes that would consume large parts of the DOJ's resources (time and money). I'm more behind Lynch's pursuit of white collar criminals, executives, and corporations than I was with previous Attorneys General. It was disgusting the leniency that banks enjoyed when they could settle for superficially large penalties that were less than they profited from because the DOJ did not want to go to trial.
GM was telling its customers their cars were safe, denying the deaths were related until it was found out- far, far greater scandal and to say they got off lightly is a massive understatement. The banks were sent to the gulags in comparison to GM's punishment.
Agree that the attitude to white collar crime is much different now though.
It's nothing to do with the economy, it's just a black swan single company issue tbh. No way Germany will want to destroy it, given it employs hundreds of thousands, and the US is a very tiny part of the company's profits.
Do you just mean in regards to DPFs (Diesel Particulate Filter) or is there something else about diesels that 'needs' long trips?
Yea that and the EGR will get clogged basically, the DPF in particular can cost thousands.
@Dans After speaking to two fund managers today, one who sold out on the news and one who is sticking in there, I am tempted to buy in. I have a feeling VW will bounce back by 5-7% tomorrow, but if it falls further then happy days. Reckon it's worth a couple of grand in the Sipp.
The guy who sold out caught up in the scare stories I feel. Bullet points from interview with more positive guy (who has a very good track record btw).
-The EPA will obviously fine them in the US and it's bad, but there is no similar mechanism in Europe or Asia- would need to go through courts.
-EPA only fined General Motors $900m for ignition failure case- killed c174 people. No-one died in VW case. GM fine averaged $33.50 a car, the VW share price reaction has factored in over 100x that at $37,500 per car- $18bn.
-VW share price down 40%. Its car business generates c40% of its revenue (remainder being commercial vehicles and leasing). Effectively means you are buying VW with the car business coming free.
-Even if EPA fines $10bn, plus $2bn private law suit costs, nothing re $30bn wiped off market cap and could pay that now from $25 free cash in bank and remain in the black
-Chinese sales slowing, but growth has been exponential and just cyclical
-So, buy VW and get car business free and it is only on a price to book of 0.4x which is incredibly cheap.
I'm in.
The guy who sold out caught up in the scare stories I feel. Bullet points from interview with more positive guy (who has a very good track record btw).
-The EPA will obviously fine them in the US and it's bad, but there is no similar mechanism in Europe or Asia- would need to go through courts.
-EPA only fined General Motors $900m for ignition failure case- killed c174 people. No-one died in VW case. GM fine averaged $33.50 a car, the VW share price reaction has factored in over 100x that at $37,500 per car- $18bn.
-VW share price down 40%. Its car business generates c40% of its revenue (remainder being commercial vehicles and leasing). Effectively means you are buying VW with the car business coming free.
-Even if EPA fines $10bn, plus $2bn private law suit costs, nothing re $30bn wiped off market cap and could pay that now from $25 free cash in bank and remain in the black
-Chinese sales slowing, but growth has been exponential and just cyclical
-So, buy VW and get car business free and it is only on a price to book of 0.4x which is incredibly cheap.
I'm in.
You hear of price to earnings a lot of course, but what's price to book?
From what I understand (and this is why I am a financial journalist, not a much higher-earning analyst), price to book is pretty much the sum of the business, ie net assets, liabilities and the orders it has in place. On that basis, a price to book of 1x would be fair for a business- ie that is what it's worth on the day, but the metric is obviously forward-looking.
At 0.4x it's basically pricing in no growth. Different sectors will obviously have different P/B averages.
To put it another way, if a property company for example is trading below price to book, it is trading at a price below what the sum of the parts of its business would add up to- eg land holdings, contracts in place etc...It's normally a good buy signal in that no growth is being price into the business. Clearly VW is going to take a big hit, but it's the biggest autos company in the world and owns a range of brands from VW to Lamborghini (those well known emission watchers), Skoda and Scania lorries.
You can now buy VW for a 40% discount, which is the equivalent of the contribution of its car division- you get that free. It's worth a punt imo.
You really should read into the health effects of diesel emissions. European nations pushing diesel as a better alternative to gasoline was a mistake, same as the U.S. pushing for ethanol inclusion.
Though for quite different reasons...
So far, down another 7% this morning. I'd hold on. But I do think it could be a great buy sub 100.
Down nearly 10% now.
I know how bad a pollutant diesel is but my question was to do with the emissions between the allowed levels and what VW were really emitting.
Have no doubts it will keep fluctuating until they are hit with the fine. That will be their lowest point methinks, so I personally won't consider buying till then.
Maybe I can buy a Golf GTi at a knock down price now 
Interesting article:
http://www.fool.com/investing/general/2015/09/22/volkswagen-ag-dont-wade-in-yet.aspx
http://www.fool.com/investing/general/2015/09/22/volkswagen-ag-dont-wade-in-yet.aspx
Don't agree - the fine will take ages to be determined and I doubt it will be as high as they are saying. Read the article above - suggests the highest possible fine (US only) is now factored in.
Depends where you live. As stated to you in another post, here in Ireland Diesel is cheaper at the pumps by roughly 10cent. My car is diesel, and a full service from a main dealer is 80euro cheaper when you compare same spec and size car in its petrol model, save even more if I shopped around. Car Tax is cheaper as it is based on CO2, that swings a bit with newer cars but my car is 2009 so comparing to that time only. I get 50mpg out of my yoke, and as I drive at least 26k miles per year due to work, I save a nice bit due to having a diesel car, at least €800 per annum with all things considered. They are pointless alright if you do city driving or low mileage, you just fudge the car that way.
Some scandal from VW though. A disgrace now that there could be no apparent true fix, and any modification could impact on the cars overall performance and longevity. VW second hand values will bottom out now, even if they don't carry the 2.0l engine.
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The article doesn't suggests the fine is factored in, merely that the stock has fallen to levels expected if they were to hit with the top fine, something that has not happened. It suggests that it could go lower still and that's the most likely scenario considering this could be a worldwide scandal, heck it may even take them to financial ruin!
This few days fall would have come from people dumping the stock after the announcement of the scandal, it'll probably stay around these levels because people will be on the fence with buying and then it will take another hit when the fine comes about.
Balls, just got into the office and it's now up 0.87%! Actually sold two things to free up some cash in my Sipp last night.
The market has pretty much priced in the maximum fine- I'd buy before it cos it will rally massively when the fine (almost inevitably) turns out to be less than that.
I don't trust Motley Fool. I know their different writers have different views, but you need some consistency as a title. With the Quindell thing, they'd be screaming buy one day and don't touch this with a barge pole the next day.
Thinking of jumping in now.
Pissed I missed that down 10% bit earlier on. Still worth a pop though.
I really don't think it did because there's a lot of uncertainty around it. If they're found to have done the same thing in every country they could collapse altogether.
It's a risky investment as its early days albeit a 10% jump would have made some money on a big investment.
I waited and waited and then finally bought in at 116,50.
Currently trading at 118,65.
Fingers crossed the potential damage has been massively over exaggerated.
Currently trading at 118,65.
Fingers crossed the potential damage has been massively over exaggerated.
Like @Jippy has said, the market price slumped based on a much bigger fine than they're actually likely to end up receiving.
As people start to realise that I'm sure it'll rally. Wouldn't be surprised if it's up at around 140 by the end of the week with people jumping in now they think it's bottomed out.
As people start to realise that I'm sure it'll rally. Wouldn't be surprised if it's up at around 140 by the end of the week with people jumping in now they think it's bottomed out.
140 will do me nicely.
Currently 120.
Currently 120.
122
Thanks for your patience Jips. I lazily asked instead of thinking about it, sorry. I can't see their business outside the US being affected much, if anything it makes the americans look a bit stupid which always goes down well. Write off their US business, pay the fines and off they go.
Back down to 117 from an intra-day high of 125p. You getting worried?
EDIT: Am actually wondering if this is just a relief rally or 'dead cat bounce' and it will have a sharp second leg down and that will be the time to buy. Market timing is next to impossible, certainly doing it repeatedly...
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Not worried, no. Gonna stick with this for a few months.
I guess the dip is on the news that this affects cars sold in the EU too.
I guess the dip is on the news that this affects cars sold in the EU too.
VW is going to pound town on this one. They already set aside $7.5 billion to pay the coming fines.
Owners are in for trouble too. Recall and update could be mandatory due to public health concerns. The running profile is probably more optimal than the emissions profile. Without a urea (DEF) adding system, they'd have to run it well outside of its normal profile. Ford and international tried that when they pushed the 6.0L down into the light duty trucks (F-250 through F-550). That had disastrous results and caused failures in weak points that didn't matter under the less stringent emissions profile.
Sucks for all parties involved.
Owners are in for trouble too. Recall and update could be mandatory due to public health concerns. The running profile is probably more optimal than the emissions profile. Without a urea (DEF) adding system, they'd have to run it well outside of its normal profile. Ford and international tried that when they pushed the 6.0L down into the light duty trucks (F-250 through F-550). That had disastrous results and caused failures in weak points that didn't matter under the less stringent emissions profile.
Sucks for all parties involved.
I wonder what impact this will have on new car sales in the US? I think they are in for a big hit.
We part-exchanged a VW Touareg only a few weeks ago. I'm rather glad we did (all things considering)! VWs have always held their value well (at least in the UK), so you have to wonder if that will change at all.
I wonder why the Europeans can't do shit against FIFA or Volkswagen, surely they're not incompetent. Lots of hidden corruption? (yes I know the US are not saints themselves)
Class action lawsuit coming next.
I think their stock will continue to drop.
I think their stock will continue to drop.
Without having done a huge amount of research I don't think they'll have hit the bottom yet. Looked attractive when only considering the US situation, but there is EU to consider and almost certainly other markets as well.
Mind you, I'm far from an expert in these things
Mind you, I'm far from an expert in these things
Meh, I doubt the EU will do anything at all.Without having done a huge amount of research I don't think they'll have hit the bottom yet. Looked attractive when only considering the US situation, but there is EU to consider and almost certainly other markets as well.
Mind you, I'm far from an expert in these things
@Dans Ouch, it's starting to look like a value trap. Down another 7% today to €107, seemingly on the news that 1.2 million Audis now implicated and all of the R&D heads have been suspended. Would be amazed if Skoda, Seat etc...don't get dragged into it.
http://news.sky.com/story/1560147/2-1m-audi-cars-have-vw-emission-cheat-device
Hermes, a massive asset management firm, is really not impressed with the choice of new CEO and chairman- they wanted an external appointment to ensure genuine commitment to a change of corporate culture- sounds like they might vote against at the upcoming EGM. This is what they put out today.
hermes EOS views on volkswagen
Dr Hans-Christoph Hirt, Director at Hermes EOS:
"We are very concerned about the findings of the US Environmental Protection Agency, published on 18 September 2015, which suggest that Volkswagen systematically cheated in emissions tests of some 500,000 vehicles with diesel engines it sold in the US.
“The fact that Volkswagen has now conceded that there may be some 11 million cars worldwide fitted with so-called “defeat device” software, which detects whether the vehicle is subject to an emissions test, suggests that something has gone terribly wrong at the company.
"We welcomed the resignation of Volkswagen's CEO, Martin Winterkorn, on 23 September 2015 and the departure of other key executives as a first step in dealing with the fallout of the emissions scandal.
“Volkswagen now needs strong leadership at the management and supervisory board level which requires intimate knowledge of the group. As such, the appointment of Matthias Müller, the current CEO of Porsche, who has worked for the Volkswagen group for decades, as the new CEO, and the nomination of the current CFO, Hans-Dieter Pötsch, as chair-elect on 25 September 2015, seems to have been without alternatives.
“However, the supervisory board’s choice of corporate insiders as CEO and chair-elect also raises some real doubts whether the key shareholders have recognised the need for fundamental reform and a real new beginning.
“Moreover, under German corporate law, the management board of Volkswagen comprising Matthias Müller (since March 2015) and Hans-Dieter Pötsch (since 2003) is jointly responsible for the company’s management.
“The new CEO and the incoming chair should overhaul Volkswagen’s corporate governance, including the composition and effectiveness of its supervisory board, and create a corporate culture which ensures that the trust of customers and society will never again be jeopardised in the way it has in the past.
“Following intensive engagement with Volkswagen on corporate governance issues between 2006 and 2009, including speeches at the Annual General Meetings in 2006 and 2007, we have repeatedly raised concerns about aspects of Volkswagen’s corporate governance.
“We plan to attend the Extraordinary General Meeting of Volkswagen on 9 November 2015 and on behalf of a group of investors will explain our concerns and suggest changes to the company’s corporate governance and culture to other shareholders and the management and supervisory boards.
“In the meantime, we are in contact with Volkswagen and other car manufacturers and are intensifying our engagements in the light of the emissions scandal.”
http://news.sky.com/story/1560147/2-1m-audi-cars-have-vw-emission-cheat-device
Hermes, a massive asset management firm, is really not impressed with the choice of new CEO and chairman- they wanted an external appointment to ensure genuine commitment to a change of corporate culture- sounds like they might vote against at the upcoming EGM. This is what they put out today.
hermes EOS views on volkswagen
Dr Hans-Christoph Hirt, Director at Hermes EOS:
"We are very concerned about the findings of the US Environmental Protection Agency, published on 18 September 2015, which suggest that Volkswagen systematically cheated in emissions tests of some 500,000 vehicles with diesel engines it sold in the US.
“The fact that Volkswagen has now conceded that there may be some 11 million cars worldwide fitted with so-called “defeat device” software, which detects whether the vehicle is subject to an emissions test, suggests that something has gone terribly wrong at the company.
"We welcomed the resignation of Volkswagen's CEO, Martin Winterkorn, on 23 September 2015 and the departure of other key executives as a first step in dealing with the fallout of the emissions scandal.
“Volkswagen now needs strong leadership at the management and supervisory board level which requires intimate knowledge of the group. As such, the appointment of Matthias Müller, the current CEO of Porsche, who has worked for the Volkswagen group for decades, as the new CEO, and the nomination of the current CFO, Hans-Dieter Pötsch, as chair-elect on 25 September 2015, seems to have been without alternatives.
“However, the supervisory board’s choice of corporate insiders as CEO and chair-elect also raises some real doubts whether the key shareholders have recognised the need for fundamental reform and a real new beginning.
“Moreover, under German corporate law, the management board of Volkswagen comprising Matthias Müller (since March 2015) and Hans-Dieter Pötsch (since 2003) is jointly responsible for the company’s management.
“The new CEO and the incoming chair should overhaul Volkswagen’s corporate governance, including the composition and effectiveness of its supervisory board, and create a corporate culture which ensures that the trust of customers and society will never again be jeopardised in the way it has in the past.
“Following intensive engagement with Volkswagen on corporate governance issues between 2006 and 2009, including speeches at the Annual General Meetings in 2006 and 2007, we have repeatedly raised concerns about aspects of Volkswagen’s corporate governance.
“We plan to attend the Extraordinary General Meeting of Volkswagen on 9 November 2015 and on behalf of a group of investors will explain our concerns and suggest changes to the company’s corporate governance and culture to other shareholders and the management and supervisory boards.
“In the meantime, we are in contact with Volkswagen and other car manufacturers and are intensifying our engagements in the light of the emissions scandal.”
I saw that - interesting, and probably right but I think they rushed to be seen to be doing something - perhaps unwisely, but had they not done anything quickly the questions would have been around the lack of action, or at least of the rudderless ship.
Hard to know what to do now, but I do think long term it has to be a good bet.
Hard to know what to do now, but I do think long term it has to be a good bet.
Google Finance is around 15mins behind live I think but currently shows the stock just under the 100 mark, down 7.17% for the day.