Volkswagen AG (ADR) (OTCMKTS:VLKAY) Admits Its Ex-CEO Failed To Act On Emission Issue


Volkswagen AG (ADR) (OTCMKTS:VLKAY) admitted on Wednesday that its former CEO was alerted about the problems regarding diesel emissions tests in the United States in 2014. The former CEO chose to ignore the warnings. As a result of the news, shares of the company are trading down nearly 2% in the early trading on Thursday in the Europe.

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Detailed Account Revealed

Late Wednesday, Volkswagen disclosed the most detailed account of the emission issue as it affected the United States. The largest European car maker revealed the events leading to the disclosure that it cheated on emission tests in September last year. The issue took a toll of the erstwhile CEO of the company. Volkswagen lost the trust of the market while company’s market cap shrunk drastically, erasing 40% of its value within three weeks’ time.

The company came out with a statement rejecting the accusations leveled by its shareholders that the European firm failed to inform them on the upcoming issues. As a result, investors suffered big losses. In early trading on Thursday, the stock was trading down by about 1.9% to 113.55.

Shareholder Suit Liabilities Reduced

Commenting on the developments, Exane BNP Paribas analyst Stuart Pearson, said that Volkswagen was now facing fewer risks of shareholder suit liabilities. This is after the company clarified events in a detailed account with a firm rejection of emissions risk disclosure violations. However, the statement did not remove shareholder suit liabilities completely and the threat is still there.

The analyst has kept an ‘outperform’ rating on the shares of Volkswagen and boosted its price target to 138. The brokerage was also trimming its legal liability estimation to 10.7 billion. The company needs to erase its cheating image and remake itself once the emission issue is settled.

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