What the Arrest of Audi’s CEO Means for Volkswagen Stock — The Motley Fool

That escalated shortly: Prosecutors in Munich, Germany, arrested Audi AG (NASDAQOTH:AUDVF) CEO Rupert Stadler on Monday, per week after revealing that they considered him a suspect in a felony case associated to Audi dad or mum Volkswagen AG‘s (NASDAQOTH:VLKAY) diesel-emissions cheating scandal.

Stadler was arrested on Monday morning at his residence. Prosecutors moved to arrest Stadler as a result of of considerations that he deliberate to contact others concerned in the case, presumably to prearrange testimony. He is being held on fraud-related prices stemming from the Munich prosecutors’ investigation into VW’s Dieselgate scandal.

Here’s what we all know.

Stadler, in a blue suit, is standing next to the Audi etron quattro prototype, a midsize electric SUV wrapped in black and white camouflage.

Audi CEO Rupert Stadler, proven right here with a prototype of an upcoming electrical Audi SUV, was arrested on Monday in reference to VW’s emissions-cheating scandal. Image supply: Volkswagen AG.

An interim CEO for Audi

VW’s board of administrators has nominated Bram Schot, Audi’s gross sales and advertising chief, to take over as interim CEO, Germany’s Sueddeutsche Zeitung mentioned on Monday. German enterprise journal Handelsblatt reported that VW’s board plans to put Stadler on administrative depart for the time being.

Stadler is the newest (however not the solely) VW government to be implicated in the Dieselgate scandal since Volkswagen admitted in September 2015 that it had used unlawful software program to cheat on U.S. emissions testing of autos with diesel engines. German authorities have already got Wolfgang Hatz, the former chief of engine improvement at Porsche, in custody, and one other 20 suspects are nonetheless below investigation, the Munich prosecutors’ workplace mentioned final week.

The Munich investigation is separate from an ongoing felony investigation by the U.S. authorities. That investigation is properly alongside: Two former VW managers are already serving jail time in the U.S. on Dieselgate-related prices, and a U.S. grand jury discovered ample proof to indict former VW CEO Martin Winterkorn earlier this 12 months.

The top of an engine, showing Audi's four-rings logo and

Audi’s three.zero liter TDI diesel engine, one of a number of VW Group engines programmed to cheat on emissions assessments. Image supply: Volkswagen AG.

What does this imply for VW’s inventory?

VW’s extraordinary shares, or widespread inventory, closed down about 2.2% in buying and selling in Germany on Monday, with volumes significantly heavier than ordinary. They fell additional in different markets after the German market closed: As of 1 p.m. EDT on Monday, American depositary receipts for VW’s extraordinary shares had been down about 2.7% in buying and selling in New York.

Those aren’t massive drops. But they’re sufficient so as to add to the inventory’s woes. VW’s extraordinary shares are nonetheless down about 30% from their pre-scandal highs in 2015.

VLKAY Chart

VLKAY information by YCharts.

VW’s beaten-down shares have drawn some curiosity from value-minded buyers. There are some good causes to contemplate VW as a price play. The firm’s earnings have continued to be sturdy regardless of the antagonistic publicity from the scandal, and there is a good dividend. VW’s extraordinary shares are presently buying and selling round 6.9 instances trailing earnings, versus the 10 to 12 instances we might anticipate for a wholesome automaker in a robust economic system.

So is it time to purchase VW?

As I mentioned final week, in case you’ve been contemplating including VW to your portfolio, I believe it is most likely finest to carry off a little bit longer. While VW could be very unlikely to exit of enterprise over this, there could also be extra and bigger penalties to return. And Monday’s occasions are removed from trivial: Losing Stadler, who has capably led Audi since 2010, is a big blow.

Given that different necessary VW executives might nonetheless be charged, and that VW’s shares are unlikely to have a catalyst for a serious bull run anytime quickly, holding off might yield a greater shopping for alternative — and a clearer view of the potential upside.

John Rosevear has no place in any of the shares talked about. The Motley Fool has no place in any of the shares talked about. The Motley Fool has a disclosure policy.



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