Volkswagen Faces Loan Woes

Volkswagen has to deal with another major blow, only a few weeks after the widely-controversial revelation about its involvement in an emission violations scandal.  This time, the German-based car magnate is facing off against the European Central Bank, or ECB.

According to a source close to the ECB, suspension on the purchase of loans for the purpose of financing VW automobiles is currently in place. This decision comes following the alleged actions of the European automaker in the manipulation of emission testing results.

Emission Testing Scandal

A “Notice of Violation” was issued by the United States Environmental Protection Agency, or EPA, to the Volkswagen Group on September 18, 2015, subsequent to the discovery of VW’s use of a particular software that can circumvent emissions testing results.

According to the investigators, VW programmed cars with TDI engines to switch their emission controls only when undergoing laboratory emissions testing. Because of this, significant differences between data gathered during the testings and actual, real-life driving had been generated.

Not only were these discrepancies found in VW cars, the inconsistencies were also observed in Audi models from 2009 to 2015.

Volkswagen Group Responds

The news was undoubtedly impactful and not something that should be ignored. People waited for the carmaker’s acknowledgment and reactions to the accusations. With their customers’ trust and patronage on the line, VW initially released a statement that described the findings as technical glitches and not something done deliberately.

However, after some more heat and flack, plus solid evidences right in front of their faces, the company finally admitted to the shortcomings and confessed to the deception and dishonesty.

Since the scandal broke, almost 12 million cars had been recalled around the world.

VW Chief Resigns

Martin Winterkorn, who was Chief Executive Officer of Volkswagen AG, stepped down five days after the wrongdoings of their company had been disclosed. His decade-long service with VW ended because of, what he referred to as, some terrible mistakes and decisions made by a few of his colleagues.

VW Finance Suffers Consequences

As to be expected, the breach of trust the Volkswagen Group committed led to a downward spiral for the company.

Current figures reveal that the car company’s shares have been hit by a 33% slump, which is the lowest they have ever been in five years. Qatar, which holds 17% of the shares in the company, has already lost about 5 billion US dollars. Furthermore, almost 7 billion US dollars is expected to be shelled out for the cost of legal services and other damage control tactics.

Also, since VW has taken a huge hit to its reputation and status, deposits and other profit-generating sources are likely to dwindle in the coming years.

Although a deferment on the purchase of Asset Backed Securities, or ASBs, linked to VW car loans has been declared, a review of the entire situation is ongoing. A final decision on whether to totally cut connections with the automobile group is to be announced later this week.