Volkswagen to take hit from UK motor finance redress scheme
Sky News reports the carmaker's financial arm will absorb costs from a UK compensation scheme for mis-sold motor loans
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Volkswagen will book a financial hit tied to the UK's motor finance redress scheme, Sky News reports. The size of the charge has not been disclosed.
Volkswagen Financial Services, along with Mercedes-Benz, had challenged the Financial Conduct Authority's £9.1 billion redress scheme for mis-sold historic motor loans, a fight first reported by Sky News. Other lenders took a different path: Lloyds Banking Group, Barclays and Santander's UK arm accepted the FCA's revised scheme after setting aside billions of pounds combined to compensate affected borrowers, according to MarketScreener, citing the PA Motoring Service. BMW Financial Services set aside more than £200 million for the same issue, PA Motoring Service reported, with its 2024 provision of £206.9 million already up sharply from £70.3 million a year earlier.
The disclosure lands on top of a guidance picture that had already worsened. On September 18, Volkswagen cut its full-year operating margin guidance to 1% from a previous range of 4% to 5.5%, and the stock fell 7.5% in the aftermath.
A UK motor finance charge is a different kind of problem from the labor and restructuring costs markets have spent weeks digesting. It stems from legacy lending exposure rather than the German cost base, so it adds to, rather than overlaps with, the margin pressure already flagged from China and restructuring. Coming after a guidance cut investors are still absorbing, it extends a pattern of downside surprises and suggests the turnaround Volkswagen promised is proving more expensive than the market had priced in.