Volkswagen Q3 net loss of $1.83B on scandal charges

Problems with the existing methodology for measuring harmful nitrogen oxide emissions have come into focus following revelations that Volkswagen installed defeat devices in a few 11 million diesel cars in the USA and Europe that allowed the company to cheat in emission tests.

Investors were initially relieved at the shallower-than-expected quarterly loss and VW shares shot up 4.5 percent to an intraday high of 109.90 euros on the Frankfurt stock exchange. Excluding the emissions-related provisions, the lacklustre profitability of the core VW passenger auto brands increased slightly.

The first set of accounts since then show it put aside €6.7 billion ($7.4 billion), leaving VW with a €2.52 billion pre-tax loss for the third quarter of the year.

The EU's executive Commission said Wednesday that the new tests will more closely resemble real road conditions.

As a result, the German group said it now expected its operating profit to drop "significantly below" last year's record 12.7 billion euros. That news led to a stunning series of admissions: VW sold millions of diesel-powered cars around the world with software that switches on the cars' emission-control systems only when it determines that an emissions test is under way. Further underlining the priority of China for Volkswagen is the fact that CEO Matthias Mueller chose the country to be his first major trip destination on a trade mission this week, along with German Chancellor Angel Merkel.

"We will uncover and disclose the full truth of what happened and we will make sure that something like this never happens again", said Herbert Diess, CEO of Volkswagen's Passenger Cars brand.

Mueller said the company is examining the future of every vehicle model in its lineup and will overhaul its corporate strategy.

Prosecutors from Braunschweig, close to VW's home town of Wolfsburg, are investigating several people on initial suspicion of criminal offences such as fraud or violation of competition rules, a spokesman said.

From 2021, European Union rules stipulate that cars across a carmaker's entire range must not generate more than an average 95 grams of carbon dioxide per 100 kilometres.

VW reported an operating loss of €3,48 billion for July-September, its fiscal third-quarter, in line with analysts' expectations.

The company said it has been expecting the operating margin to remain between 5.5 percent and 6.5 percent, a little lesser than last year's 6.3 percent.

Analysts took comfort in VW's robust balance sheet, suggesting the carmaker should be able to cope with the costs from regulatory fines, lawsuits and refits which a few have said could total as much as 35 billion euros.