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Volkswagen on potential Justice Department fine: ‘The situation is under control’

An Audi AG A3 35 TDI emissions certification vehicle, produced by Volkswagen AG, waiting to be tested in South Korea on October 1, 2015.
SeongJoon Cho | Bloomberg | Getty Images
An Audi AG A3 35 TDI emissions certification vehicle, produced by Volkswagen AG, waiting to be tested in South Korea on October 1, 2015.

The CEO of Volkswagen Brands has sought to reassure consumers and investors about a potential fine from the U.S. Department of Justice, telling CNBC that "the situation is under control."

"We're making good progress, and we have stable communication with the agencies in America," Herbert Diess said on Wednesday at the Paris Motor Show, although he stressed that he couldn't comment on the size of the expected fine.

"I'm confident that we will get out of this very soon," he added.

Volkswagen and the Justice Department are in discussions over a settlement to resolve a criminal investigation into the German carmaker, following the diesel emissions scandal which emerged just over one year ago.

Share in the automaker fell on Tuesday following a report that the Justice Department was assessing how big a criminal fine it can obtain from the German carmaker without putting it out of business.

In response, the company issued a statement which asserted the robustness of its financial position and its capability to cover the cost of the emissions scandal, according to Reuters.

Diess stressed that Volkswagen had "significantly" overhauled its corporate governance in the light of the diesel scandal fallout.

"I think we are turning round," he said. "From Paris on, it's going upwards."

He also asserted his confidence in the ability of Matthias Mueller, who was appointed CEO after news of the scandal broke.


Taking on Tesla and Apple?

Looking ahead, Diess was keen to stress the company's focus on electric vehicles, saying that diesel VWs will have disappeared "for sure" by 2020.

The company plans to be a market leader in electric cars by the year 2025, he said, selling 1 million of the vehicles.

"We will solve the problems, repair our cars and then, probably by the year 2021, become fully electric with a new platform entirely designed for the future and also to challenge the Teslas and probably the Apples of the world," he said.

U.S.-based Tesla is perhaps the best-known electric car producer; the company said it ended the second quarter of 2016 producing just under 2,000 vehicles per week. Meanwhile Apple is also rumored to be entering the electric car market.

Diess argued that the company's strong consumer base in China meant it was well placed to enter the electric car market, despite being a relatively late mover in the space, because the country was "very likely" to become the lead market for these types of cars.


Operating margins in focus

This focus on innovation has led some to be concerned about future operating profit, however, which has slumped in the wake of the automaker's emissions crisis.

When pushed on a timeline for when Volkswagen could hit its 6 percent operating margin target, Diess said the company was "working on that."

"We think also innovation is expensive, but sharing the innovation between many cars is a good way to bring a huge step of innovation to a broader public," he said. "We showed that (it is) probably the core competence of VW to bring innovation to a broader public crowd and we will be able to demonstrate that in the new era of automotive mobility as well."

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