S&P again cuts scandal-hit Volkswagen's credit rating

Standard and Poor's cut its credit rating for German automaker Volkswagen for a second time in two months Tuesday, saying its emissions scandal had "tarnished VW's reputation and brand perception".

The international credit rating agency lowered to 'BBB+' from 'A-' its long-term debt rating and said the outlook remained negative amid the biggest scandal in the company's history.

"The downgrade reflects our view that VW's manipulation of engine emissions exposes the group to material, wide-ranging adverse credit impacts," said the agency, which had already downgraded Volkswagen in mid-October.

"In our view, these events have tarnished VW's reputation and brand perception, and will negatively affect the group's market position and competitive advantage."

Volkswagen has been engulfed in scandal since September, when it admitted more than 11 million diesel vehicles worldwide had "defeat" software designed to cheat on emissions tests.

The devices turn on emissions controls when a vehicle undergoes emissions test, then turn them off under normal operations, allowing illegal amounts of nitrogen oxide to spew into the air.

The world's number-two automaker faces regulatory and criminal investigations in several countries, including Germany and the United States, and potentially billions of dollars in fines.

The scandal has widened, with the German automaker subsequently revealing that it had understated carbon dioxide emissions, including those for gasoline engines, for up to 800,000 vehicles.

S&P said that for VW "these risks and related costs continue to expand and deepen, particularly following the recent disclosures regarding the misrepresentation of CO2 emissions and fuel consumption levels".

"We also see weaker business prospects for the group, as VW experiences reduced profits and cash flows from lower volumes and prices, as well as substantial costs and potential fines and litigation damages," it said in a statement.

Volkswagen's US sales plunged 25 percent in November after it suspended sales of diesel vehicles in the wake of the cheating scandal, the embattled German automaker said Tuesday.

Share prices in the auto giant ended off 1 percent at 130.15 euros Tuesday but still around a quarter below September, when the emissions scandal broke. Even so, shares have recovered from their post-scandal trough having several times fallen below the 100 euro mark in the past three months.
Source: AFP