"Fitch Ratings has downgraded Volkswagen AG's long-term Issuer Default Rating (IDR) to 'BBB+' from 'A' and Short-term IDR to 'F2' from 'F1'. The outlook on the long-term IDR is negative," Fitch stated.
In September, the US Environmental Protection Agency (EPA) found that Volkswagen had used software to falsify emission test results for nitrogen oxide in up to 11 million diesel-engine cars.
Fitch explained that the downgrade reflected the "corporate governance, management and internal control issues" that were brought to light by Volkswagen’s emissions test scandal.
Last week, Volkswagen admitted that about 800,000 cars sold in Europe with petrol engines likely had understated levels of carbon dioxide emissions and were more expensive to drive for buyers.
Fitch also said the downgrade represented "expected direct and indirect financial effects" from the ongoing emissions crisis. They include the "recall costs, fines, lawsuits and legal claims worldwide," in addition to lost sale and the likelihood of discounts on the company’s vehicles and revenue loss.
The credit ratings agency pointed out it expects the final cost to Volkswagen related to the consequences of the emissions scandal to be "substantial."
Volkswagen has announced it would set aside additional $2.2 billion over the previous $7 billion to mitigate the effects of the scandal.
