The notorious emissions-cheating scandal that befell VW, officially known as Volkswagen AG (VLKAY), isn’t over yet, apparently.
According to numerous news sources, prosecutors in Germany representing the Federal Financial Supervisory Authority (BaFin) are launching an investigation into whether or not the former CEO of Volkswagen, Martin Winterkorn, failed to notify the company’s shareholders (i.e. investors) of the company’s emissions scandal in a timely fashion.
Spreading the Blame
Another VW executive named Herbert Diess, who is the head of the passenger car brand, is also under scrutiny as a part of the probe by German authorities. There was some speculation that the previously unnamed executive could be the company’s current chairman of the board of directors, Hans Dieter Poetsch, who served as chief financial officer (CFO) under Winterkorn.
The ramifications of not informing investors soon enough is that the auto manufacturer’s bottom line took a serious hit as a result of the scandal, thereby putting a dent in the value of their shares of VW. This information would also be valuable to prospective investors who were planning on buying stock in the company.
According to a report by CBS News, “German stock market law requires publicly traded companies to alert investors as soon as they have unforeseen developments that could affect a decision to buy or sell the stock.” In essence, this amounts to market manipulation.
Although it is likely that Winterkorn read a memo in May of last year alerting him to “emissions irregularities,” the chief executive definitely knew of the issue by July 27th. There was no official disclosure until September 22nd, 2015. Naturally, VW maintains that it met its obligation to notify investors in a reasonable time frame. 17 other company employees are being investigated for suspicious or fraudulent activity relating to the scandal.
Tarnishing VW’s Reputation
The company has already set aside €16.2 billion ($18.2 billion) to deal with the cost of recalling or fixing the affected cars. These vehicles were equipped with special software sensors that detected when the vehicles were undergoing emissions tests (but then turned off these controls under normal driving conditions in order to boost performance). Half a million vehicles were affected.
The fact that this software existed at all shows a clearly purposeful act of attempting to trick emissions regulators who were applying relevant U.S. environmental law. The entire ordeal brings the company’s “Clean Diesel” marketing shtick into question as disingenuous.
VW claims that it didn’t think the problem was a particularly big deal until it was notified by the Environmental Protection Agency (EPA) in September. It released its public admission four days later.
Impact on Platinum and Palladium
Volkswagen is the largest automaker in all of Europe. In the roughly one year since rumors of the scandal began, its stock price has fallen nearly 40%.
Two precious metals, platinum and palladium, are primarily used in catalytic converters in automobiles in order to reduce emissions. The metals are even more prevalent in cars with diesel engines. This means that one possible result of the scandal is greater industrial demand for the two Platinum Group Metals in the manufacture of such vehicles.
Demand for platinum by the auto industry is forecast to grow by 2% this year. In fact, 40% of all global platinum demand comes from carmakers. There is certainly some evidence that platinum is undervalued at the moment.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.