Volkswagen Stock Price Will Drop in 2016 Despite Major Board Changes

Volkswagen AG (OTCMKTS ADR: VLKAY) made some drastic changes to its senior management team today (Thursday), and the Volkswagen stock price is up 0.4% on the news.

The embattled German automaker announced it reduced the number of managers directly reporting to CEO Matthias Muller by almost half. It also added five new members to his executive team.

volkswagenVolkswagen said the structural changes will "speed up the decision-making process, reduce complexity, and increase efficiency."

VW's five new managers reporting to Muller will step into their roles next year. One of the biggest additions is Ulrich Eichhorn, managing director of German automotive industry association VDA, who will head research and development. Another noteworthy addition is Fred Kappler, head of VW group services, who will take over group sales.

The sweeping changes come as the beleaguered auto giant continues a company-wide overhaul following the global emissions scandal that continues to unfold.

But these executive changes won't be enough to lift the Volkswagen stock price through 2016...

Why the Volkswagen Stock Price Will Keep Falling in 2016

In September, Volkswagen admitted that as many as 11 million of its diesel vehicles worldwide had software that could cheat nitrogen oxide emissions tests.

The company will need to recall some 500,000 cars in the United States and about 8.5 million in Europe.

Earlier this month, it was also revealed that VW withheld information from U.S. regulators long before the diesel emissions scandal was made public in September.

The automaker's U.S. environmental compliance employees notified their superiors in Germany in 2004 that they believed Volkswagen needed to alert regulators about a faulty emissions part on dozens of cars from Volkswagen's Audi unit.

But no action was taken.

Now global regulators are stepping up their investigations into VW's deceptive practices. And that will continue to have a major impact on the Volkswagen stock price...

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The European Union's parliament has appointed a committee of 45 EU lawmakers to investigate whether European regulators were too lax in enforcing emission rules in the car industry. The committee will also investigate whether the European Commission, the EU's executive arm, or EU member states had evidence of Volkswagen's manipulations before they became public.

The scandal has already put a serious dent in VW's sales worldwide and greatly impacted the Volkswagen stock price.

The true cost of how much "Dieselgate" will impact the Volkswagen stock price is still unknown. The recall costs and fines are still unclear, but VW has already allocated about $7.3 billion to deal with costs relating to the scandal.

Still, some say the cost could be much more than that...

A Credit Suisse analyst has reported the Dieselgate cost could reach a whopping $87 billion in a worst-case scenario.

That would make the VW scandal almost 60% more costly than the BP Deepwater Horizon spill. A potential $87 billion in losses would be almost seven times the German automaker's net profit for 2014.

And you can't put a price on the monetary loss of VW's once-esteemed reputation.

"The reputational damage to the VW brand may represent an extinction-level event," Money Morning Chief Investment Strategist Keith Fitz-Gerald said in September.

"In the words of branding expert Jim Prior of Lambie-Nairn in London, VW will 'have to live with the legacy of being a brand that cheated,'" Fitz-Gerald said.

All of these things will impact earnings in years to come, Fitz-Gerald continued.

At $30.22, the Volkswagen stock price is down 29.83% year to date.

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