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Moody's changes Volkswagen's outlook to stable, affirms ratings

Moody's changed its outlook on German automaker Volkswagen AG to stable from negative and affirmed the A3 long-term issuer ratings and prime-2 short-term commercial paper ratings of the company and its subsidiaries.

The rating agency said the U.S. Department of Justice criminal investigation and other legal matters will not pose major financial risks to Volkswagen over the next 12 to 18 months. It added that any associated financial risks would be manageable within the limit of the existing provision for the remediation of the diesel emissions issue.

"The change in VW's outlook to stable reflects the company's strong operating performance trend in 2016 and 2017 which was much better than anticipated, despite the diesel issue that had occurred in September 2015, and thus offsetting the higher than expected provisioning for the diesel settlements," Falk Frey, a senior vice president and analyst for Volkswagen, said.

Moody's further said that the company's business setup would have the capacity to contend with long-term cyclicality within the global passenger vehicle markets.