VW Needs Hardware Fix for 3 Million Engines in Diesel Recall

  • Other affected engines only require software updates
  • Moody's says scandal could weigh on company into 2017

Volkswagen AG will need hardware fixes for about 3 million cars in Europe affected by the diesel-emission manipulations as the region’s largest automaker scrambles to meet demands from regulators.

Cars featuring a 1.6-liter engine require technical tweaks, while software updates are sufficient to make the other affected engines compliant, a VW spokesman said by phone. VW said last week it will recall about 8.5 million cars across Europe through 2016 and acknowledged efforts to fix all cars might drag on until 2017.

VW has also stated the fallout from the scandal will cost more than the 6.5 billion euros ($7.4 billion) already set aside. Worldwide some 11 million cars with diesel engines are affected by the wide-ranging emissions rigging that was uncovered by U.S. regulators and triggered the resignation of Chief Executive Officer Martin Winterkorn.

Moody’s Investors Service said Wednesday that uncertainties about the potential impact on VW’s reputation, earnings and cash flows could weigh on the manufacturer’s credit profile into 2017. New CEO Matthias Mueller said last week protecting the company’s credit rating is a top priority. The manufacturer can recover from the scandal in two-to-three years if the right decisions are made now to make VW more efficient, agile and cost competitive, he said.

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