“Crisis made changes possible that were previously unthinkable”
The business of VolkswagenGroup with auto financing and leasing contracts is still hardly burdened by the diesel scandal. As the VWSubsidiary Financial Services announced on Monday, the operating result rose again last year to a record level and reached 2.46 (previous year: 2.1) billion euros.
However, the balance slumbers due to the falling residual values for diesel cars, a risk of about 100 million euros, as CFO Frank Fiedler said. Depending on the model, the company expects a reduction in the residual value of up to 500 euros per vehicle.
To cushion the risk, VW Financial Services has set aside 50 million euros for the current financial year alone. CEO Lars-Henner Santelmann said that the decline in used car prices for VW diesel vehicles is limited exclusively to Germany and abroad is not an issue. According to Santelmann, VW Financial Services has contracts for 237,000 diesel vehicles in Germany, the value of which will be affected by the exhaust gas scandal.
Impending Driving Bans: Diesel residuals are in free fall
Overall, the financing subsidiary of the Wolfsburg Group has digested the consequences of the exhaust gas scandal well, said CFO Fiedler. He wants to return to the North American capital market in the first half of the year and raise funds for refinancing there as well.
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This source had dried up because of the scandal that became known in 2015. In contrast to other financial service providers and banks, VW Financial Services benefited from the tax laws that came into force shortly before Christmas in the USA and achieved a book profit of 1.5 billion euros.
With tailwind by the strong profit increase and the conversion of the division, by now also the PorscheBank has been integrated into the financial services activities of the entire group, Santelmann has ambitious plans. The number of financing, leasing, insurance and maintenance contracts is set to rise from the current 19.7 million to 30 million by 2025, he said. VW Financial Services already has sufficient equity capital for this growth course: 25.6 billion euros – an increase of 21.2 percent within one year. The Common Equity Tier 1 ratio of the European Central Bank (ECB) directly supervised institution was 17.6 percent at the end of last year, three percentage points above the requirements of the supervisors.