VW to set aside billions more to cover Dieselgate costs

(Reuters) - Volkswagen will substantially increase the amount of money set aside to cover its emissions test cheating scandal from the 6.7 billion euros ($7.6 billion) currently earmarked, two people familiar with the matter said on Wednesday.

Europe’s biggest carmaker will make provisions for a double-digit billion-euro amount in its 2015 results on April 28, the sources said, speaking on condition of anonymity due to the sensitivity of the matter.

One said the German company might not pay a dividend to shareholders on the results and if it did, it would be less than 1 euro per share. Volkswagen (VW) paid out 4.80 euros per common share and 4.86 euros per preference share on 2014 results.

VW declined to comment.

The company is struggling to put a cost on the biggest business scandal in its history seven months after it admitted to cheating U.S. diesel emissions tests, as it is embroiled in legal proceedings around the world - especially in the United States, where it faces a crucial court hearing on Thursday.

Arndt Ellinghorst, an analyst at market research firm Evercore ISI, expects VW’s total costs from the “Dieselgate” scandal to reach about 30 billion euros.

Final provisions will depend on the outcome of talks with U.S. regulators, the Justice Department and the Federal Trade Commission, one of the sources said.

A U.S. federal judge last month gave VW and regulators until April 21 to agree a fix for nearly 600,000 diesel cars on U.S. roads implicated in VW’s manipulations, or face a trial.

Analysts have said a deal with U.S. authorities, also on financial penalties, would remove a major deterrent to investing in VW, whose shares have lost billions in value since the scandal broke in September.

The possibility of a settlement boosted the carmaker’s shares 6.6 percent on Wednesday, the biggest gain in Germany’s benchmark DAX index.

“It would be a major positive trigger for the stock if VW quantified the total potential cost of the diesel affair,” said Evercore ISI’s Ellinghorst, who recommends buying VW shares.

Scandal-related expenses could cut VW’s fourth-quarter operating profit 70 percent to 992 million euros, a Reuters poll of analysts found.

VW is resisting a demand from U.S. plaintiffs to go to trial rather than settle the case with government regulators, according to a court filing.

The company does “not believe any expedited hearing or bench trial is appropriate or required”, according to the agenda for the hearing on Thursday at the San Francisco district court about VW’s progress towards reaching a deal with the U.S. Environmental Protection Agency (EPA).

The plaintiffs - a committee representing thousands of consumers who say they were tricked into buying polluting diesel vehicles - proposed an expedited hearing or bench trial, or an expedited “all issues” trial including punitive damages.

Additional reporting by Jan Schwartz