VW Scandal Rocks Auto Stocks

Volkswagen ( VLKAY ) is in the hot seat for installing a defeat device to cheat on vehicle emissions tests, then lying about it to the California Environmental Protection Agency's Air Resources Board and the US EPA for more than a year. Not gonna lie, I gotta respect your gangster for the nifty algorithm. But shame on you for lying to the government.

The shame was too much for CEO Martin Winterkorn to bear. He resigned, limping home with his estimated $67 million severance that includes a $32 million pension and company car for as long as he lives. Poor guy. Do you know what it's like to only be forced to choose between Porche, Lamborghini, Audi and Volkswagen for the rest of your life? 67 million just doesn't buy what it used to these days. Look at him, he's really taking it hard.

Tough day for the town of Wolfsburg where Volkswagen's factory is. Not only are you guys in a heap of trouble there, but the Wolfsburg Soccer team let Polish National Team Captain Robert Lewandowski of Bayern Munich score five goals in nine minutes. Congrats, Wolfsburg you're officially the Detroit of Germany. Hey, at least you don't have to root for the Lions.

According to EPA officials, 482,000 VW cars could be subject to a maximum of fine of $37,500 each. That adds up to about $18 billion. Earlier this month, GM agreed to pay $900 million to settle a criminal investigation over its failure to recall cars with faulty ignitions that were linked to more than 100 deaths. Kill a hundred people, $900 million. Lie to the EPA, $18 billion. No wonder why everyone loves the EPA.

Other automakers have been hit by the fallout. Regulators in Europe are looking at BMW's ( BAMXF ) diesel-powered X3. According to a German magazine, during a road test the BMW X3 diesel exceeded European emissions limits eleven times over. Eleven times over. That's as disappointing as being promised a shiny new BMW and you come to find out that you're going to get…a BMW X3. It's the SUV sorority girls buy during their first job out of college and the Honda CRV finally breaks down. The only SUV too small for a grown a man to fit in.

If you're looking for another stock in the industry to buy, you should take a look at Daimler ( DDAIF ) . They are the only stock in the foreign automaker industry that is a Zacks Rank #1 (Strong Buy). While this business could come under scrutiny in the near future regarding emissions, auto sales have been coming on strong over the last several months.

Daimler shares have come under pressure even while earnings estimates have continued to increase. After failing to push above $100 for the second time in May, shares dipped into a bearish trend. That sentiment has lingered as the stock has come down to retest the October 2014 lows. But plenty of volume stepped in last time as buyers couldn't resist. This may be a good price to think about adding Daimler again.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

VOLKSWAGEN-ADR (VLKAY): Free Stock Analysis Report

BMW AG (BAMXF): Free Stock Analysis Report

DAIMLER AG (DDAIF): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

    Learn More