VW fined $1.2 billion by German prosecutors over diesel cheating

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BERLIN -- Volkswagen AG was fined 1 billion euros ($1.18 billion) over diesel emissions cheating in what amounts to one of the highest ever fines imposed by German authorities against a company.

The prosecutor"s office in Brunswick in VW"s home state of Lower Saxony, Germany, ordered the fine for organizational deficiencies in supervision which failed to prevent "impermissible software functions" from being installed in 10.7 million cars between 2007 and 2015.

Prosecutors ascertained a "violation of supervisory duties," the prosecutor"s office said in a statement on Wednesday. It said the fine did not address civil claims or claims by vehicle owners.

Analysts at Evercore ISI said this fine would likely help end all criminal investigations against VW in Europe, but would not settle shareholder lawsuits.

The new fine was not included in 28.5 billion euros of provisions that VW set aside for the diesel cheating scandal, and would hit earnings, Evercore ISI said.

It will add another 1 billion euros to the diesel-related cash outflow of about 4 billion euros that VW had anticipated for this year. VW had net cash of about 24 billion euros at the end of the first quarter, providing a substantial liquidity buffer to digest the impact.

The German fine follows a U.S. plea agreement from January 2017, when VW agreed to pay a criminal fine of $4.3 billion to resolve criminal and civil penalties.

Volkswagen"s new CEO, Herbert Diess, said further steps were needed by the company to overcome its diesel cheating scandal and to restore trust in the company.

VW still faces a multitude of probes both in Germany and abroad, with legal proceedings in 55 countries pending and investigations into market manipulation in Germany. Investors have accused the company of informing markets too late about the probe, a view the company has contested, saying it couldn"t have known the issue would balloon as it did.

Bloomberg contributed to this report

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