Time to take down the stockings, tuck away the ornaments and get shopping! Because as any bargain-hunter knows, the disappointment that comes from not getting what you want under the tree is easily forgotten by trading up for something better in the January sales.
That may be the hope of VW chief executive Matthias Mueller who told me at the Paris Motor Show in September that he wanted a Christmas gift from the US Department of Justice (DOJ), in the form of a settlement over the emissions-cheating scandal.
The carmaker went to great lengths to close the case in the US by year end –securing multi-billion dollar deals with a US judge to fix more than half a million vehicles carrying the defeat device and pledging additional funds to tackle climate change and promote electric-car sales. That’s good news for VW’s bid to move from naughty to nice in the eyes of angry customers and eco-conscious drivers, but it wasn’t enough for Santa to seal the deal with the DOJ. Nevertheless, time may be on VW’s side.
The DOJ fine is expected to be finalised before Obama leaves office on 20 January. If the settlement goes according to plan, VW could be in pole position to outperform its peers in 2017.
Lingering uncertainty surrounding the eventual bill paid to the DOJ has largely kept the stock in check. Despite a 2 per cent increase over 12 months, shares are still off around 19 per cent since their pre-diesel crisis level. Much of the bad news has arguably been priced in.
Evercore ISI analyst Arndt Ellinghorst, who holds a buy rating on VW, expects the DOJ fine to land at around $3bn, which would be covered by the company’s €18.2bn diesel provisions already set aside. Anything north of $5bn, however, would be short-term negative, he says. It would also break the current record fine under US federal environmental laws, set by BP’s charge for the Deepwater Horizon oil spill.
Speaking to me in September, VW’s Mueller refused to comment on a report that the DOJ was evaluating how much it could fine the carmaker without forcing it into bankruptcy, insisting the firm believed that current provisions were sufficient to cover legal liabilities.
The doubters surrounding VW’s investment case will point to other legal unknowns threatening the company: from shareholder lawsuits filed in Germany to fresh calls from European regulators to seek US-style compensation for drivers. But these risks pale in comparison to the punitive damages being sought in the US.
On the latter issue, recent sales data in Europe suggests drivers may be less offended by emissions-cheating than bureaucrats in Brussels. VW managed to eke out a small annual gain in market share across the EU in November for the first time since the diesel scandal.
The rebound came in the same month VW’s top brass unveiled an impressive plan to turn around profits and cut costs at the struggling namesake bank. If you’re still unconvinced that Volkswagen is close to burying its diesel sins in the dust you might be better persuaded by the same logic drawing bargain hunters to the high street this week.
VW is trading near six times 2017 earnings, compared to German rivals BMW and Daimler, which trade closer to eight and nine times full-year earnings.
It is January, after all. Time to forget the mistakes and disappointments of 2016 and shop for some discounts.