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Scandal Costs Grow but Volkswagen Stock Spikes

Scandal Costs Grow but Volkswagen Stock Spikes

July 20, 2016

Volkswagen Group’s emissions scandal rose to more than $20 billion, amid further legal trouble in the U.S. for the German automaker.

The company said Wednesday that “legal risks predominately arising in North America” would add another 2.2 billion euros, or $2.4 billion, to a bill that already totaled 16.2 billion euros, or $17.8 billion based on today’s currency exchange rates.

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Still, Volkswagen shares traded in Frankfurt jumped 5.7% to 123.10 euros after the automaker said its operating performance was “significantly higher than market expectations for the first half of 2016.”

VW said it would post an operating profit of 7.5 billion euros, or $8.3 billion, for the first six months of the year when excluding one-time items such as the effect of the emissions scandal. The VW brand outperformed expectations, the European auto market improved and corporations purchased more fleet vehicles than expected.

To be sure, 2016 full-year revenue is still expected to fall by 5%, VW said. The company will release its entire first-half earnings statement on July 28.

The company on Tuesday became the target of yet another round of lawsuits over the bogus software it has admitted to inserting into about 600,000 U.S. diesel vehicles — and 11 million worldwide — to cheat emissions standards. The attorneys general of New York, Massachusetts and Maryland took action against the company, seeking civil penalties in light of VW officials “allegedly attempting to cover-up their behavior.”

“The allegations against Volkswagen, Audi and Porsche reveal a culture of deeply-rooted corporate arrogance, combined with a conscious disregard for the rule of law and the protection of public health and the environment,” New York AGEric Schneiderman said in a statement.

RELATED: VW’s False Clean Car Claims $10 Billion for Consumers

Volkswagen last month agreed to pay up to $10 billion for vehicle buy backs and loss compensation to consumers, $2.7 billion in environmental mitigation, $2 billion on clean-emissions infrastructure and $603 million to most states in a sweeping settlement that must still be approved by a federal judge.

VW said Tuesday in a statement that the latest allegations “are essentially not new” and that “it is regrettable that some states have decided to sue for environmental claims now, notwithstanding their prior support of this ongoing federal-state collaborative process.”

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