As a result of cheating on emission tests with half a million vehicles in the US, Volkswagen is set to pay the largest fine in the history of car business: $16.5 billion.
Of course, VW is a very big company, selling millions of vehicles worldwide, so it can take the punishment. But that doesn’t mean it isn’t going to hurt.
It’s not clear what penalty range the U.S. is considering in the criminal case against Volkswagen. The company had net liquidity of 28.8 billion euros ($32.4 billion) as of June 30, and Chief Financial Officer Frank Witter said his goal is to keep the target for average net liquidity at 20 billion euros to ensure funding needs and protect the company’s credit rating.
The carmaker generates several billions of dollars of cash each quarter and could tap into a credit line or raise capital if necessary to pay its obligations.
It’s unlikely that even a massive and punitive fine would ruin VW, as Schoenberg and Katz acknowledge. But whatever Dieselgate ends up costing VW in the US, it isn’t going to be good for the automaker’s flagging American presence. In the most competitive auto market in the world, and with a deep brand legacy dating back to the original VW Beetle, VW has weak market share — only around 2%.
Sales have been swooning since the emissions scandal broke, but they weren’t so hot before it hit. Thus far, VW hasn’t given any indications that it wants to exit the US, at least with the VW brand (Audi and Porsche are still doing well).
But whether VW stays or goes is something that the Justice Department will probably have to consider, Schoenberg and Alan Katz report. If the company’s ambitions to be a top-seller in the US weren’t such a struggle, the government could conceivably be more aggressive.
NOW WATCH: Reports say Volkswagen has agreed to buy back 500,000 cars — see if your car may be eligible
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.