VLKAY Stock: Has Volkswagen AG Finally Bottomed? Not Likely

VLKAY-StockVLKAY Stock Has Settled Down, But It’s Just a Calm Before the Storm

Volkswagen AG (OTC:VLKAY) stock enjoyed a small one percent gain on Tuesday, but it continues to trade at levels not seen since 2007. VLKAY stockholders are not in safe waters yet; indeed, the stock may have hit another regulatory shark-infested zone.

The small gains reflect overall higher sales in the auto sector. Its rival General Motors Company (NYSE:GM) reported 16% more cars sold in October 2015 than a year earlier; Ford Motor Co. (NYSE:F) saw 13% higher sales; while Fiat Chrysler Automobiles N.V. (NYSE:FCAU) sold 15% more cars than in 2014 with its share price close to the yearly high territory of about $16.50.

VW stock has more room to drop because Porsche and Audi have fallen into the regulators’ viewfinders and European sales dropped almost seven percent. These are usually biased in favor of the very engines at the heart of the emissions scandal known as “Dieselgate.” However, The U.S. EPA said they had found the presence of the “Dieselgate” incriminating software, which falsifies emission readings, on Porsche as well in the wake of new U.S. investigations. (Source: Jeremy Korzeniewski, “EPA discovers defeat device in more VW TDI engines,” Nov. 2, 2015.)

In particular, the U.S. Environmental Protection Agency is said to be concerned about the 3.0 V6 diesel mounted on the brand’s luxury cars including the Jetta, Porsche Cayenne, Passat, and other cars from the VAG Group mass market. The EPA would be investigating the possible use of software that false emissions testing of this type of engine widely used Volkswagen, Audi, and Porsche 2014-2016, deepening the scope of the investigation that until now concerned only Volkswagen.

Volkswagen has responded to the allegations, stating that it has not used the emission manipulating software in the models being investigated now. Volkswagen published an apology to its customers on October 15th, buying a page in the Turin daily La Stampa to apologize to its Italian customers for the scandal. Incidentally La Stampa newspaper is controlled by the Italian-American FCA Automobiles, which has offered discounts to Europeans who switch from Volkswagen to Fiat. (Source: “Italy police search VW offices in Verona as part of local investigation into emissions scandal,” US News, Oct. 15, 2015.)

Will Volkswagen AG Stockholders Ever Regain Confidence in the Company?

Volkswagen, whose portfolio of car brands includes Audi, Skoda, Seat, Bentley, Porsche and Lamborghini, also apologized, suggesting it would go to any length to be forgiven in order to regain trust. All that remains is to wait and see how it will end the investigation and what management will cook up to raise the value of Volkswagen stock and the Group’s image, leaving the mess behind after it has caused damage to the entire automotive sector.

The scandal, based on the rigging of diesel engine emission tests that triggered a collapse of Volkswagen stock, could now trigger an over $40.0 billion class action lawsuit brought forth by top Volkswagen shareholders.

Quinn Emanuel, who won some $50.0 billion for his clients in class action lawsuits for clients and representatives such as Google, Sony, and FIFA, has been contacted by the Bentham litigation funding group (fund specialized in the financing of large lawsuits) to prepare a lawsuit on behalf of Volkswagen stockholders over the billions they have lost in the markets. Emanuel advised he would be contacting the major VW stockholders, including the sovereign wealth funds of Qatar and Norway. “We estimate losses of shareholders up to 40 billion Euro,” said Quinn, who starts plans to launch legal action in Germany by February. (Kedar Grandhi, “VW scandal: Bentham plans to file €40bn lawsuit on behalf of shareholders,” International Business Times, Oct. 19, 2015.)

Autoworkers Union Threaten Legal Action Against Volkswagen Management

The influential German auto sector trade union, IG Metall, has threatened its own lawsuit, threatening a massive legal battle should VW management make workers pay for their mistakes through redundancies and layoffs. Indeed, such a scenario should have VLKAY stockholders worried. (Source: Joanna Slater, “The shared fate of Volkswagen and the German city it built,” The Globe & Mail, Oct. 14, 2015.)

The German press has analyzed rumors of layoffs directly related to the emissions scandal and VW layoffs, suggesting 6,000 workers could lose their jobs on the line. The rumors also suggest that Chancellor Angela Merkel has been pressed to consider a special welfare provision to support the would-be redundant workers. IG Metall insists the workers have no responsibility for the scandal and “the union will do everything possible to ensure that employees do not pay for the damage caused by managers.”

The Bottom Line on VLKAY Stock

VLKAY stockholders should brace themselves for more repercussions despite the small breather that Volkswagen shares have enjoyed lately. The scope of the investigation is widening, extending to the company’s headquarters in Villers-Cotterets, France. Even as the German group is trying to save what can be saved in image and reputation. Volkswagen will likely buy pages in other newspapers worldwide, however lavish the apology sentiments may be, they will hardly be sufficient to appease the wrath of VLKAY stockholders.

Stay in the loop. Follow Alessandro on Facebook and Twitter.