To weather expected expenses related to the Dieselgate emissions scandal, Volkswagen has gone to the financial community seeking 20 billion euros — $21.5 billion – to assure its liquidity. According to Bloomberg, the automaker does not currently need the money. Volkswagen AG is seeking the money so that it can have a financial cushion. According to two people familiar with the plan, the automaker wants to have to fund in place by the end of December.
The automaker is set to begin meetings Monday at its Wolfsburg headquarters with a dozen banks. The meeting is scheduled to go over the funding package.
In a statement to Bloomberg, Volkswagen said that it has “always considered that a well-diversified portfolio of financing tools gives us the necessary flexibility to offer appropriate and competitive financing options for our customers as well as our industrial investment needs. It is perfectly normal that we are in a constructive ongoing dialog.”
Volkswagen’s funding plans are in response to the growing Dieselgate scandal. In September, the automaker admitted it had used a software switch to reset diesel engines so that they met U.S. emissions rules. The switch recognized several telltales that showed when a diesel engine was under test. As soon as test mode was indicated, the engine parameters changed so that engines that were failing emissions testing would pass. At the end of the test, the software reverted to “normal.” Performance and mileage increased while emissions compliance tanked.
The Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) found the non-compliance mode and in September a recall order was issued for 482,000 VW TDI (turbocharged diesel) models. The vehicles were built between 2009 and 2015. After the initial recall, VW admitted that 11 million vehicles worldwide were affected by the software cheatware. The scandal’s price tag is expected to rise to 25 billion euros in 2017, Bloomberg said.
Meantime, Volkswagen’s sales have been impacted by the Dieselgate scandal. Automotive News reported today that global deliveries of VW cars dipped 5.3 percent in October to 490,000 cars. For the January-to-October timeframe sales were off 4.7 percent ot 4.84 million. The sales drop came as VW struggled to cope with the widening and increasingly costly emissions scandal.
And, Volkswagen’s Audi subsidiary was reported today to be facing a criminal probe in Germany related to the emissions scandal.