Volkswagen to repay its customers; watch out for Motherson Sumi

Volkswagen, a German car manufacturer has reached the emission settlement to repair or buy back the vehicles and repay the owners subsequently. The entire deal is worth 14.7 billion USD, whereby it would pay on an average 10000 USD to each customer. To add to it 2.7 billion USD and 2 billion USD would be paid for environmental mitigation and research on zero-emissions technology respectively.

Months after the emission scandal was out, the company’s investors proposed a legal action. Volkswagen is caught under three emission scandals: Deceitful software installed in about 11 million vehicles across the globe with 1.2-,1.6-,2.0- litre engines; unbalanced carbon dioxide emission in nearly 8 lakh vehicles in Europe; and doubtful emissions software in nearly 85000 VW, Audi and Porsche vehicles with 3.0 litre engines in the U.S.

According to the deal, Volkswagen is required to repay USD 10 billion to repair or buy back of nearly 4.75 lakh polluting vehicles with 2.0 litre diesel engines. The scandal was out in September 2015 and hence the vehicle owners who bought before the period are eligible for the buybacks at the clean trade-in value of their cars. The average value of the VW vehicles has dropped since the scandal.

The settlement is yet to be put on papers and awaits judge’s approval before it can go for the settlement.

Motherson Sumi, which is the key supplier of spare parts to VW almost in the entire Europe has been facing a lot of volatility in its share prices since the scandal is out and also because of the Brexit effect. However, the fundamentals of the stock remain positive and assures that there has not been any order cancellations from VW so far.

Motherson Sumi stock is down today by 1.2 per cent at Rs 272.20 with the effect of the news.