Fitch slashes VW ratings over poor management

WOLFSBURG, Germany — Fitch ratings agency on Monday cut Volkswagen's (VW) credit rating by two notches, saying that a widening pollution cheating scandal has exposed weak corporate governance at the German auto giant.

"We believe that the emergence of a fraud of this magnitude, going either unnoticed or uncorrected by top management for so long is not consistent with a rating in the 'A' category," said Fitch.

The agency added that it had therefore downgraded Volkswagen to "BBB+" over the "corporate government, management and organisational issues highlighted by the ongoing emission test crisis".

VW is engulfed in a huge pollution scandal that was initially centred on so-called defeat devices, sophisticated software fitted into diesel engines to skew the results of tests for nitrogen oxide emissions.

The carmaker has admitted to fitting 11 million diesel engines worldwide with the rogue software, triggering both regulatory and criminal investigations in several countries, including Germany and the United States.

But last week, Volkswagen revealed that beyond the nitrogen oxide scam, it had also understated carbon dioxide emissions of 800,000 vehicles, including petrol cars.

The latest revelations give rise to "the possibility of further problems still to be uncovered", said Fitch, as it put VW on negative watch.

In a protest Monday, environment group Greenpeace added a "C" and "2" on either side of the company's circular logo at the entrance of a factory in Wolfsburg, forming "CO2", and hung a banner bearing the slogan "The Problem" next to it.

Consumers want vouchers 

As Volkswagen prepared to recall millions of cars to remove the defeat devices, Germany's transport ministry said Monday that out of the 2.4 million affected cars in the country, around 540,000 would require hardware repairs.

Volkswagen had earlier said that the repair work required for the 11 million cars could range from a simple software tweak to a major engine overhaul.

VW's former chief executive Martin Winterkorn quit in September at the height of the storm over the pollution cheating. 

According to press reports, targets on technical performance and costs set by Winterkorn had pushed engineers to resort to fitting cheating devices in the vehicles.

Volkswagen has said the carbon emissions cheating was revealed by the group's employees. "The question of how we got there is the subject of an investigation," the group said.

Meanwhile, Germany's consumer association wants auto giant Volkswagen to give compensation vouchers to German customers affected by its massive pollution cheating scandal, as the company has offered to do in North America.

"The group must assume its responsibilities," said Klaus Mueller, president of the Federation of Associations for the Protection of Consumers, in an interview with the Rheinische Post newspaper on Monday.

"A voucher is the minimum that the company can give to compensate affected consumers,"
he added.

Mueller's call came after a US website reported that VW is planning to offer pre-paid cards worth up to $1,250 (1,160 euros) to affected American customers as part of a "goodwill package".

Part of the sum can be used only at VW dealers for the purchase of a new car or accessories, while the remainder can be spent elsewhere, according to the site "The Truth About Cars".

VW confirmed that it was offering vouchers to customers in the United States and Canada, without giving details of the sums involved.

A spokesman said the company was developing "an individual package for each market" and that for Germany, consultations were ongoing with the authorities.