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VW warns of profit slide after €800M Audi fine; Germany probes Opel plants

TOP NEWS

* Volkswagen AG said its earnings for fiscal 2018 will be directly affected by the €800 million fine imposed on its Audi AG brand by the Munich public prosecutor's office as part of its diesel emissions scandal investigation. The investigation found a breach of monitoring duties at the "emissions service / power engine approval" organizational unit of Audi that chiefly affected its V6 and V8 diesel engines. Audi will not contest the ruling, which it said marks the end of the investigations. In turn, Porsche Automobil Holding SE, which holds a 30.8% stake in Volkswagen, lowered its fiscal 2018 earnings guidance to between €2.5 billion and €3.5 billion, from the previous outlook range of €3.4 billion and €4.4 billion.

* Opel, controlled by France's Peugeot SA group, confirmed that prosecutors are conducting searches at two of its German factories in Rüsselsheim and Kaiserslautern for evidence of cheating on emissions tests. Germany's transport ministry, the KBA, said it would order about 100,000 vehicles to be recalled as part of the probe, according to Reuters. The KBA reportedly has found five software programs capable of altering vehicle emissions at Opel since 2015, the newswire said. In a separate statement, Opel said it "objects to the accusation of using inadmissible defeat devices" and told the KBA in an ongoing hearing that Opel vehicles "comply with the applicable regulations." "Should an order be issued Opel will take legal action to defend itself," the company said.

CARMAKERS

* Ford Motor Co. appointed John Savona, a former director of the carmaker's global manufacturing quality unit, as vice president, North American manufacturing. Ford also named Elena Ford as chief customer experience officer, reporting to Joe Hinrichs, Ford's president of the global operations unit. Ford is the great-great-granddaughter of Ford Motor founder Henry Ford.

* Ford Motor Co. unveiled a new entry-level SUV in China, called Territory, which the U.S. carmaker forecasts selling from early 2019 in a bid to halt falling sales in the country, Reuters reported, citing Peter Fleet, the company's head of China and Asia. The model is reportedly developed in partnership with China's Jiangling Motors Corp. Ltd., and together with Ford's Focus and Escort models, "will start to make their volume retail contributions in the first quarter (of 2019)," Fleet reportedly said.

* Volkswagen AG-owned luxury sports car brand Porsche AG denied speculation that the company will go public, The Wall Street Journal reported. Porsche CFO Lutz Meschke fueled speculation about a possible IPO when he spoke to reporters at a media event Oct. 12. In an official statement, Porsche dismissed rumors of a possible listing.

* Volkswagen AG's Czech unit Škoda Auto unveiled a new compact model called Scala that is projected to be introduced to the public by the end of 2018.

ELECTRIC AND AUTONOMOUS VEHICLES

* Rolls-Royce Motor Cars Ltd., the luxury car unit of Bayerische Motoren Werke AG, plans to go fully electric, probably in the next decade, but will not make hybrids, Bloomberg News reported, quoting an interview with Rolls-Royce CEO Torsten Müller-Otvös. The brand, which launched the Cullinan SUV in the week of Oct. 15, previously said it would add 200 new jobs to meet demand for the new model. The new hiring has pushed up the number of people employed at Rolls-Royce's Goodwood, West Sussex plant to over 2,000, Bloomberg reported.

* Chinese electric vehicle maker NIO Inc. sold 1,766 of its 7-seater SUV ES8 models in the month of September and 3,268 ES8s during the fiscal third quarter. The third-quarter sales exceeded Nio's own forecast range of 2,900 to 3,000 vehicles. Tesla Inc. competitor Nio, which released the ES8 on June 28, said it is on track to hit a target of 10,000 sales for the second half of 2018.

POLICY, REGULATIONS AND SAFETY

* Steven Armstrong, Ford Motor Co.'s group vice president and president for Europe, Middle East and Africa markets, said a no-deal Brexit "would be pretty disastrous" for the British industry and would force the U.S. carmaker to rethink its "future investment strategy for the U.K.," BBC reported. Armstrong reportedly added that any tariff-free trade deal between the U.K. and the European Union, along the lines of a similar arrangement between the EU and Canada, "would still involve border checks — and would upset the just-in-time delivery model used by the company in Europe." A near-term investment program for Ford's Bridgend-based plant would continue, but beyond that, "it very much depends on what happens post-Brexit," Armstrong told BBC.

* Volkswagen AG CEO Herbert Diess said "the chances are perhaps 50-50 that the German auto industry will still belong among the global elite in 10 years' time" as the shift from combustion engines to batteries and electric cars gathers pace, Reuters reported. "If you look at the former bastions of the auto industry like Detroit, Oxford-Cowley or Turin, you understand what happens to cities when once powerful corporations and leading industries falter," Diess reportedly said at a conference in Wolfsburg, Germany.

* Manufacturing an electric car emits "significantly" more climate-warming gases compared to a conventional car, while making an EV battery at a fossil fuel-powered factory would emit up to 74% more CO2 than producing an efficient, conventional car, Bloomberg News reported. Most batteries are produced in countries like China, Germany, Poland and Thailand that use nonrenewable sources such as coal for electricity, the report stated. At the same time, switching to renewable energy for EV car production would slash emissions by 65%, Bloomberg reported.

AUTO PARTS AND EQUIPMENT

* Bayerische Motoren Werke AG has teamed up with Swedish battery maker Northvolt and recycling company Umicore SA to develop a sustainable value chain for battery cells for electric vehicles in Europe. The companies plan to establish a "closed life cycle loop," in which they start with a recyclable cell design that is manufactured using a process powered mainly by renewable energy. BMW has made an investment in the alliance to support the initial phase of the collaboration, but it did not disclose the amount.

* Faurecia announced that the French parts maker's board decided Oct. 10 to appoint Peugeot SA's general secretary, Grégoire Olivier, to the board. Olivier, who was the chairman and CEO of Faurecia for a year in 2006, will succeed Carlos Tavares and stay on until the 2019 annual general meeting.

* Volkswagen AG's Audi AG plans to apply machine learning software that will automatically detect fine cracks and marks on sheet metal parts in future production. The advanced procedure will replace the optical crack detection technique in use at Audi facilities.

AUTOMOTIVE RETAIL

* Volkswagen AG's sales grew 5% year over year to 3.04 million vehicles in mainland China and Hong Kong in the first nine months of 2018. The German automaker's premium brand Audi delivered 483,000 cars, up 15.4% year over year, while VW's Czech unit Škoda Auto sold 250,200 vehicles until September, an increase of 17.7% year over year.

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The day ahead

Early morning futures indicators pointed to a higher opening for the U.S. market.

In Asia, Hang Seng gained 0.07% to 25,462.26, while the Nikkei 225 rose 1.25% to 22,549.24.

In Europe, around midday, the FTSE 100 shed 0.30% to 7,008.24, and the Euronext 100 rose 0.44% to 992.65.

On the macro front

The Redbook index for retail sales, the industrial production report, the housing market index, the Labor Department's Job Openings and Labor Turnover Survey and the Treasury International Capital report are due out today.

Click here to read about today's financial markets, setting out the factors driving stocks, bonds and currencies around the world ahead of the New York open.

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