Volkswagen Supplier Financial Stress

Please click here for a complimentary copy of our Volkswagen Supplier Stress report.

During September 2015, Volkswagen admitted to installing software to cheat on emissions tests on over 11 million of its vehicles. While the final impact to VW's finances and overall diesel vehicle market share will not be known for years, some impacts are already being felt in the supply chain. Suppliers with high exposure to VW may face declining volumes and requests for additional savings. In fact, VW has already placed all non-essential investments on hold and has requested 3 Billion Euros in savings from its supply base. Companies whose supply base strongly overlaps with VW's should take extra effort to monitor the condition of their suppliers' finances. This report provides background on the emissions scandal as well as preliminary comments from suppliers. Key takeaways include: 

  • Scale - Over 11 million vehicles worldwide will need to be retrofitted. Affected 2016 diesel models are not permitted to be sold in the United States or European Union.
  • Emissions Impact - Software in the vehicles detects testing environments to comply with emissions requirements. When not in a test environment, NOx emissions are 10-40x higher than permitted levels.
  • Supplier Savings - Volkswagen has initiated a plan to capture 3 Billion Euros in savings from its supply base.
  • Supplier Comments - Some VW suppliers have already seen an impact on their business, while others are unsure about the potential impact of new diesel regulations.
  • Supplier Exposure - VW accounts for over 40% of some suppliers' revenue. Significant decreases in sales of VW vehicles, or diesel vehicles in general, will have a material impact.
  • Supplier Risk - Public and private suppliers' financials should be reviewed to determine exposure to VW, cash reserves, and available means of mitigation. 

Please click here for a complimentary copy of our report.