Report: Volkswagen May Be Forced to Sell Luxury Brands

The recent Volkswagen diesel emissions scandal may force the German automaker to sell its luxury brands.

Engadget is reporting the Volkswagen is prepared to sell Bentley, Lamborghini and Ducati, if necessary, as it prepares to pay for the onslaught of Volkswagen emissions class action lawsuits that the company is facing over the diesel emissions scandal, in addition to any compensation that consumers are owed since their vehicles’ values have dropped because of the scandal.

Volkswagen took out a loan of about 20 billion euros in order to deal with the aftermath of the scandal, Reuters reported. As part of the terms of that loan, Volkswagen had to agree to sell it’s three luxury brands to pay off that loan, if necessary.

Bentley, Lamborghini and Ducati are Volkswagen’s smaller holdings since they are made for very specific markets and in much smaller quantities than it’s other makes.

Alternatively, the German automaker can opt to sell MAN, which makes and supplies ship engines, generators and other heavy-duty industrial components.

However, CNN reported that the Volkswagen diesel emissions scandal may cost the automaker $87 billion to resolve. If that’s the case, Engadget concludes that selling Volkswagen’s luxury brands will barely scratch the surface.

Volkswagen called the $87 billion estimate “pure speculation,” according to CNN.

The Volkswagen scandal is expected to affect approximately 11 million vehicles around the world. According to CNN, that is more cars than what Volkswagen typically sells in one year, and the $87 billion price tag is the equivalent to seven times what the German automaker made in 2014.

Whatever the outcome, resolving the Volkswagen diesel emissions scandal is expected to put a significant financial strain on the automaker.

The Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act in mid-September, alleging that several Volkswagen and Audi diesel vehicles made from 2009 to 2015 used a “software that circumvents EPA standards for certain air pollutants.”

The California Air Resources Board along with the EPA is also investigating VW over the alleged scandal.

EPA official Cynthia Giles said that “using a defeat device in cars to evade clean air standards is illegal and a threat to public health.”

The notice of violation issued by the EPA said that Volkswagen had installed “a sophisticated software algorithm on certain Volkswagen vehicles” that is able to detect “when the car is undergoing official emissions testing, and turns full emissions controls on only during the test.”

The emissions rig was allegedly added to several Volkswagen and Audi vehicles in addition to the Porsche Cayenne.

The EPA’s notice of violation was issued after Volkswagen had admitted in early September that it had embedded the deceitful software into several of its vehicles.

Volkswagen has already been hit with several class action lawsuits in federal courts around the country by VW customers who say that the deceitful act by the German automaker has caused the value of their vehicles to drop.

UPDATE: On June 28, 2016, Volkswagen reached proposed settlements with both the U.S. Department of Justice and the U.S. Federal Trade Commission following the VW emissions scandal. VW’s deal with the DOJ includes up to $14.7 billion along with vehicle buyback provisions as well as funding for pollution control programs. In addition to the DOJ settlement, Volkswagen will also spend up to $10 billion in a buyback and lease termination settlement with the FTC that is expected to include about 475,000 vehicles.