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The Worst Volkswagen Headlines in 2015

By John Rosevear – Dec 28, 2015 at 2:40PM

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Slumping earnings, China's slowdown, and boardroom drama made 2015 a tough year for Volkswagen even before the emissions cheating scandal erupted. But that scandal generated just about all of VW's worst headlines this past year.

On the move, indeed: VW's emissions-cheating scandal generated the company's worst headlines in 2015 and forced CEO Martin Winterkorn to resign in September. Image source: Volkswagen.

What were Volkswagen's (VWAGY -1.39%) worst headlines in 2015? 

Clearly the worst news for VW in many years concerned its massive emissions-cheating scandal. Shortly after charges were filed by U.S. regulators in September, VW admitted to selling millions of diesel-powered vehicles fitted with software designed to give false passing readings on government emissions tests. (Learn more here.)

That wasn't the only tough story for VW in 2015. The German auto giant's earnings were slumping before the scandal broke, on rising costs and slowing sales in China. In an ordinary year, those stories would be the focus of our attention. But the real bad news for VW started to pile up in earnest after the U.S. Environmental Protection Agency (EPA) announced its allegations late on Friday, September 18.

The Fool took its first looks at the scandal the following Monday, attempting to sort out why VW might have decided to cheat and how much the scandal could cost. 

Why Volkswagen (Allegedly) Cheated on Emissions Tests

The EPA's allegations were only the beginning of the story. Two days after the Fool published the article above, CEO Martin Winterkorn was forced to step down. Winterkorn had already been under some pressure from his board because of those slumping earnings, but the scandal proved to be the last straw.

Volkswagen's CEO Resigns as Worldwide Pressure Grows

Porsche chief Matthias Mueller was given the nod to succeed Winterkorn a few days later. His informal, collaborative style represents a sea change for the traditionally autocratic company, and he seems determined to transform its culture and structure for the better. (It's still early, but history may see Mueller's appointment as the best news VW had in 2015.)

Matthias Mueller took over as Volkswagen's CEO after Winterkorn's departure. Image source: Volkswagen.

Mueller wasted no time positioning VW to deal with the consequences of the scandal. The costs were (and are) still far from certain, but by the end of September, it was already clear that the decision to use the cheating software is likely to be a very expensive mistake.

How Many Billions Will Volkswagen Have to Pay?

Volkswagen's Scandal May Have Already Crushed Its 2015 Profit

Mueller quickly warned that VW's big-spending ways would be sharply curtailed until the company came to terms with the scandal's costs. About six weeks later, he followed through with a plan that cut over a billion dollars from its 2016 spending plans.

Volkswagen's CEO: Scandal Will Force Big Spending Cuts

Volkswagen Cuts Spending to Cope with the Emissions Scandal

It could be months, maybe even a couple of years, before the full consequences of the scandal play out. But some effects are already becoming apparent. VW's U.S. sales took a steep dive in November, and they slipped (though to a lesser extent) in Europe and China as well.

Volkswagen Sales Are Crushed as the Diesel Scandal Hits Hard

That drop wasn't a surprise. In the U.S., VW's diesel owners are among its most loyal and valuable customers. Many are feeling betrayed, and they've made their feelings known -- in some cases, by filing lawsuits. 

The 2.0 liter "TDI" diesel four-cylinder engine at the heart of the scandal. Image source: Volkswagen.

Mueller is hoping to head off some of those suits by setting up a settlement fund not unlike the one General Motors (GM -0.89%) CEO Mary Barra established to deal with the consequences of defective ignition switches that were linked to over 100 accident deaths.

Why Volkswagen Wants to Settle With Diesel Owners Now

I think Mueller hopes the fund will help VW move past the scandal more quickly. It may turn out to have been a smart move. But in the near term, there are surely more tough headlines to come.

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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