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Volkswagen (VLKAY) Pays $2.9 Billion to Repurchase Vehicles

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Volkswagen Aktiengesellschaft has paid $2.9 billion through Feb 18, to buy back almost 138,000 vehicles as per a court document. The recalled vehicles have been affected by the emissions scandal.

Last year, Volkswagen had agreed to spend $10.3 billion to repurchase up to 487,000 polluting 2 liter vehicles that had a software installed to enable them to use unfair means to clear the emission tests. In Feb 2017, the company was granted the option to pay $1.22 billion to fix or repurchase almost 80,000 3 liter vehicles by a federal judge. These vehicles contain an auxiliary emissions system that can emit over nine times the permissible limit.

Volkswagen will also have to pay up to $4.04 billion if it is not granted the approval to fix all the luxury Porsche, Audi and VW diesel 3 liter vehicles in the settlement. In aggregate, the company has agreed to spend up to $25 billion in the U.S. to settle claims with owners, regulators, dealers and buy back affected vehicles. Under an agreement, the company has agreed to plead guilty for installing secret software in its vehicles to clear the emissions by using unfair means test in three felony courts in Detroit.

Volkswagen Group performed well in fiscal 2016 despite the crisis. The company delivered record 10.3 million vehicles to customers worldwide in the fiscal year, up 3.7% year over year and achieved its target for 2016. Vehicle production and sales in the year also increased 3.9% and 3.8%, respectively. Moreover, the company is proposing the increase of its fiscal year dividend to €2 per share, from the €0.11 paid in 2015.

For fiscal 2017, management expects deliveries to increase moderately from 2016, although market conditions are expected to be challenging. Intense competition, volatile exchange rates and consequences of the emission scandal are expected headwinds.

Volkswagen outperformed the Zacks categorized Automotive-Foreign industry over the last three months. Share price of the company increased 11.5% over the period, while the industry saw a 1.3% decrease. The company has been seeing higher demand despite the crisis.

Zacks Rank & Other Stocks to Consider

Volkswagen currently sports a Zacks Rank #1 (Strong Buy).

Other favorably ranked companies in the auto space include Honda Motor Co., Ltd. (HMC - Free Report) , Fiat Chrysler Automobiles N.V. and Renault SA (RNLSY - Free Report) . All the three stocks flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Honda has an expected long-term growth rate of 27%.

Fiat has an expected long-term growth rate of 21.7%.

Renault has an expected long-term growth rate of 4.6%.

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