Volkswagen (VLKAY) to Recall 2.46M Vehicles in Germany

Volkswagen AG VLKAY will recall 2.46 million vehicles in Germany, which are equipped with the emission cheating software, per sources. Of the total vehicles recalled, 1.54 million cars are of the Volkswagen brand, 531,813 of the Audi brand, 286,970 of Skoda and 104,197 of Seat.

Previously Volkswagen said that 8.5 million affected vehicles need to be recalled in Europe. The German automaker is facing a challenging situation after the Environmental Protection Agency (EPA) revealed that it had developed a software algorithm to deceive U.S. emission tests. Volkswagen admitted that its diesel vehicles are installed with software which makes the engines appear to have low emission levels during tests. According to the EPA, Volkswagen vehicles emit nitrogen oxides, or NOx, at almost 40 times the standard amount. Nitrogen oxide emissions lead to smog, acid rain as well as serious health concerns like lung cancer.

Almost 11 million vehicles around the world – including Jetta, Beetle, Audi A3 and Golf from model years 2009–2015 and Passat of model years 2014 and 2015 – are fitted with this software. Out of the total, 5 million vehicles have been manufactured under the Volkswagen brand and 2.1 million under the Audi brand.

Volkswagen may incur costs of 6.7 billion euros ($7.4 billion) for recalling these vehicles. The company also expects an expenditure of about 2 billion euros ($2.1 billion) related to compensation payments for manipulation of carbon dioxide emission levels.

Zacks Rank

Volkswagen currently carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks include General Motors Company GM, Fox Factory Holding Corp FOXF and O'Reilly Automotive Inc. ORLY. All these stocks carry a Zacks Rank #2 (Buy).

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