Credit ratings agencies Standard & Poor’s (S&P) and Moody’s have both warned over the credit rating of crisis-hit Volkswagen.
“We expect Volkswagen to incur substantial remediation costs to correct the engines of the cars affected and potentially face material fines from regulators, ” S&P said in a note. “Criminal charges in the US may also follow. We expect the group’s leverage metrics to be constrained by this charge, and for cash flow to reduce as these expenses are incurred.”
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Moody’s warned that the damage to Volkswagen’s reputation could ultimately affect the company’s future earnings. Fitch said it had placed Volkswagen on “negative watch” until the full scale of the emissions scandal becomes clear.
Volkswagen’s share price has lost a third of its value since the crisis broke last weekend.
The company said it has put aside EUR6.5bn in the third quarter to allow for possible additional costs associated with recalls and fines. However, some estimates suggest that the ultimate charge could be ten times that figure, with additional damage done to Volkswagen in the market as it loses share due to its harmed reputation.
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By GlobalData
