The aftermath of the emissions scandal from Volkswagen will undoubtedly be extremely costly for the company. Industry analysts are saying that the associated recall will be one of the most complex and expensive fixes in the history of automobiles.
Volkswagen will have to repair 11 million diesel vehicles worldwide that were equipped with software that was designed to trick regulators into believing that the cars were emitting less pollution on the road than they actually were.
These vehicles, in which the German car company must now install new parts, were not designed to accommodate any new equipment. The new equipment must be integrated into the vehicles to make them compliant with emissions standards.
Volkswagen will most likely establish special shops just to install the equipment. Additionally, the company will be required to work with dozens of countries in order to meet their environmental regulations.
Meanwhile, the automotive company is still examining other diesel vehicles to make sure that none of them contain the cheating software.
Director of automotive testing for Consumer Reports magazine Jake Fisher said of the situation, “I can’t think of any other recall that would be as comprehensive. It’s really an expensive rework.”
However, Volkswagen will face more expenses than just simply costs associated with the recall. The car company is also compensating dealers for vehicles that they have been unable to sell. Additionally, the company is also facing more than 325 consumer lawsuits in the United States alone.
And of course, the company is also going to be heavily fined by state authorities across the globe. Top executives will also face criminal charges. Add in the downturn in stock prices from the scandal, and it’s very easy to see that Volkswagen is facing a major disaster.
The $7.3 billion that Volkswagen has set aside for the scandal will certainly be inadequate. The company could very well end up spending $23 billion before all is said and done. Estimates show that the company can spend up to $30 billion before it will have to start liquidating assets.
Volkswagen has responded by selling the shares that it owns in various companies and by drastically cutting annual investments into its own brand. For now, all non-essential projects are being cancelled or significantly delayed.
If the company does decide to try and raise more money, it will have a very difficult time achieving such a task. Selling more shares would be virtually impossible since few members of the public want to touch the company with its destroyed image. The company would most likely have to sell off one or more of its brands.
Specific plans for fixing the vehicles have not yet been confirmed. They will most likely involve a combination of both software and hardware repairs. Older vehicles involved in the scandal will likely require a retrofit to function with the new technology.
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