VW emissions scandal: misconduct, process failure and tolerance of rule-breaking blamed – as it happened
- VW admits emissions scandal was caused by systematic failures
- Snap summary: VW lifts lid on the scandal
- Bank of England keeps interest rates unchanged
2.59pm GMT
With that, we are closing up for the day. Thank you for all your great comments, and we'll be back tomorrow.
2.46pm GMT
Here in London, Anglo-African financial firm Old Mutual is the biggest faller on FTSE 100 index. It has slid 11% to 174p after South Africa's finance minister was sacked, pushing the rand to a record low.
South African bank and asset manager Investec is also down, tumbling 11% to 489.8p the worst day for the shares since 2009.
2.33pm GMT
With regard to the Volkswagen emissions-rigging scandal, the carmaker's management reiterated today that only a small group of employees were responsible.
Despite the scandal, orders so far this year are up 3.5% and chief executive Matthias Mi1/4ller said he was confident that buyers would overcome their reluctance to buy the group's cars in coming weeks. The board is still unable to estimate the scandal's legal costs.
1.47pm GMT
Back to the Bank of England. Investec's chief economist Philip Shaw has sent us his thoughts:
Although the minutes once again reported a 'range of views' on the committee, an increase in the pace of domestic cost growth will need to be evident before a majority on the MPC is prepared to raise interest rates, particularly bearing in mind the background of subdued international commodity price trends.
In this respect we continue to expect the first move to occur in Q2 next year, but we will place a lot of weight on the direction of the wage numbers (note that October's figures are out next week) and trends in sterling. However although the pound has slipped back recently it remains almost 1% firmer on its trade weighted basket since the inflation report, which is perhaps a reminder that there is no guarantee that the current period of 'lowflation' will be shortlived."
1.34pm GMT
And here is our story on Volkswagen, following this morning's press conference. My colleague Graham Ruddick writes:
Volkswagen has admitted for the first time that the diesel emissions scandal was the result of systematic failures within the company, rather than just the actions of rogue engineers.
1.20pm GMT
The most interesting discussion in the minutes was about the recent slowing in average weekly earnings growth, says Allan Monks, UK economist at JPMorgan.
The MPC noted the slowdown may reflect the large drop in average hours worked reported at the same time. The MPC also concluded that this source of weaker pay does not affect the outlook for unit wage cost growth and, hence, the inflation outlook. The committee said it would revisit in February the issue of why average hours have dropped.
The interpretation of the decline matters for how much slack the MPC perceives there to be. As before, MPC rhetoric in the coming months will be sensitive to developments in inflation and the labour market. Commodity prices may have fallen this week, but core inflation moved up in the last release. Some surveys for 4Q also suggest that employment growth is set to strengthen. Depending on how average hours move, this may indicate that productivity growth has slowed in 4Q following the strong gains reported in 2Q/3Q."
1.14pm GMT
You can read our full story on the Bank of England here, by my colleague Katie Allen.
1.09pm GMT
Martin Beck, senior economic advisor to the Ernst & Young ITEM Club, has interpreted the MPC minutes in a different way, focusing on pay.
Despite falling unemployment, pay growth appears to have recently levelled off at a rate below what the committee was expecting in November. MPC members speculated on possible explanations, including a shift in the composition of employees towards lower-skilled and lower-paid workers or very low inflation feeding into modest pay rises. Beck says:
Our view is that the unemployment/inflation trade-off has continued to shift in a favourable direction, reflecting past strong growth in the supply of workers and the effect of labour market policies.
With the likelihood that these factors will continue to keep pay growth down, we remain confident that the MPC will not hike interest rates until the end of next year."
1.04pm GMT
More on the Bank of England, which did nothing today, as expected. The only dissenter on the nine-strong monetary policy committee was Ian McCafferty, who voted for a quarter-point rate hike.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says:
The markets have interpreted the minutes as markedly dovish, and the committee's statement that there is "no mechanical link" between its and other central banks' monetary policy seems to be an attempt to stamp on the view that Fed rate hikes will force the MPC's hand. The committee also refrained from passing further judgement on the low level of market interest rate expectations, even though last month's strong inflation report forecasts seemed to be an attempt to steer markets towards expecting an earlier hike."
We still think that the MPC is likely to hike in Q2, about six months earlier than markets expect now. Oil prices haven't fallen enough to prevent CPI inflation picking up, perhaps to about 1% by March, and they will have little bearing on inflation in two years' time, which is the relevant horizon for monetary policy. The fiscal squeeze and high debt levels will require the MPC to be cautious, but the continued tightening of the labour market and the likely downward pressure on sterling when the U.S Fed starts to hike suggest that the MPC will decide by May that interest rates need to rise. We see Bank Rate at 1% by the end of 2016 and 2% by the end of 2017.
The chart shows that the MPC was not unanimous at the start of two of the last three tightening cycles, suggesting that a dovish minority is unlikely to delay lift-off.
12.44pm GMT
What did we learn in that two-hour press conference in Wolfsburg?
12.18pm GMT
And that's the end of the press conference. If you missed it, don't fret, as VW are promising to have a recording online shortly (here)
12.06pm GMT
Here are the minutes from the Bank of England's meeting, explaining why interest rates aren't going up yet.
12.05pm GMT
Back to Volkswagen, and Mi1/4ller appears to confirms that he *will* attend the Detroit Motor show (it runs from January 11 to 24).
12.02pm GMT
Back to Britain briefly, and the Bank of England has left interest rates unchanged at today's meeting.
Once again, only one policymaker (Ian McCafferty) voted to hike borrowing costs to 0.75%.
Bank of England leaves bank rate at 0.5% in 8-1 vote following December MPC meeting
11.59am GMT
Another questioner wants proper details from VW:
Q: Which part of Volkswagen actually knew about the emissions cheating? And you must have known that meeting the US emissions targets would have been difficult {and thus might lead to rule-breaking]
11.56am GMT
Q: This scandal dates back to 2005, so what is VW doing about the staff and board members who were involved then?
Chairman Hans Dieter Pitsch says....
11.53am GMT
Q: Why hasn't VW got a fix for its US cars, and will it provide more help to American dealers who are suffering?
We are impatient and want to speed up the process, Mi1/4ller replies, but we can't set deadlines to the US authorities who are handling the issue.
11.52am GMT
Q: More details on the sales impact, please.
Mi1/4ller says that sales to China have picked up recently, compensating for drop-offs in Europe.
11.51am GMT
Q: Is VW going to squeeze its suppliers to help cover the cost of the crisis?
We are not going to "torture" our suppliers and force them to lower their prices. That is not our style.
11.47am GMT
Q: What will Volkswagen do to compensate customers across Europe who fear they have been left with a car whose second-hand value has fallen because of the scandal?
Mi1/4ller replies that he's already said VW will offer appropriate packages to customers in each market. And yes, that will include some compensation for reduced resale values.
@Volkswagen boss Mueller on compensation for Europen Volkswagen customers: We going to prepare right package for all regions, including UK
Muller indicating a compensation package WILL be offered in UK to make up for reduced resale values. #Volkswagen #dieselgate
11.43am GMT
Q: Will Matthias Muller travel to the US soon? Perhaps to the Detroit Motor Show to kneel before the US public?
Mi1/4ller confirms that he's not visited America since becoming VW CEO, as the company's staff there have the situation under control.
11.41am GMT
Q: Is Volkswagen setting aside any contingency reserves to tackle litigation in the US? Presumably you will be pleading guilty?
We have not taken any litigation provisions on the balance sheet yet, says VW chairman Pitsch.
11.37am GMT
Q: What did VW's shareholders in Qatar says to Matthias Muller when he visited them recently? Did they criticise VW's corporate governance failings?
Mi1/4ller says he was surprised to read in the newspapers that he was given a dressing down in Qatar. Talks were constructive, and we will probably 'intensify' co-operation with the Qataris.
11.32am GMT
Q: Any update on possible staff cuts?
CEO Mi1/4ller insists that permanent staff at VW shouldn't worry - "job security, stable jobs, is key".
11.30am GMT
Autoweek have published an excellent guide to the fix which VW has created to solve the emissions scandal:
11.25am GMT
VW are tweeting from their press conference:
High media interesst at press conference on status of investigations at #VWGroup pic.twitter.com/7rMz4DM0y1
Volkswagen making good progress with its investigation, technical solutions, and Group realignment #VWGroup https://t.co/Xb64MhLxhi
11.24am GMT
Q: Could VW be forced to sell assets if its sales fall sharply?
Muller says that VW isn't planning to sell any assets. Orders are up 3.5% so far this year.
Volkswagen CEO Matthias Mueller defends the company's sprawling network of 12 vehicle brands: "We are happy to have those brands."
11.23am GMT
Q: What mistakes did VW's supervisory board make to cause the emissions crisis?
Board chairman, Hans Dieter Pitsch, takes this question, and says:
It has become apparent that we can assume that a relatively small group of people actually made mistakes, acted irresponsibly.
There are no indications that the supervisory board was involved.
Volkswagen chairman Hans-Dieter Potsch says there are "no indications" that top executives or board members were involved in the scandal.
11.19am GMT
Q: What impact will the fixes have on fuel efficiency?
It will be marginal, Matthias Mi1/4ller replies, customers won't feel it.
11.17am GMT
On to questions:
Q: Has VW found a successor to Winfried Vahland, the recently named head of Volkswagen's North American business, who left the company before taking up his new job?
11.13am GMT
Finally, the sales impact of the crisis.
Matthias Mi1/4ller says:
The positive news is that the massive slump some had feared has not occurred.
The situation is not dramatic, but it is tense ... We are fighting for every customer, and every car.
11.09am GMT
In conclusion, Mi1/4ller says VW is making progress on the five-point plan he outlined earlier (here).
He reminds us that the European recall will start in a few weeks, while VW is progressing towards his new 10-year plan.
11.04am GMT
New era of "humility" for Volkswagen - will sell its private Airbus A319 and tone down presence at motor shows
11.02am GMT
With a hint of relish, Mi1/4ller turns to the planned cutbacks at VW.
We don't need our own Airbus, so we're going to sell it.
11.01am GMT
Matthias Mi1/4ller is now turning to the future, painting a vision of a bright sparkly new VW pioneering new products, not tainted by emissions scandals.
10.56am GMT
Mi1/4ller is explaining that VW is committed to changing itself, including a new push into digital.
Since the start of the year, there have been many changes at board and brand leadership level - we have the team for the future ...
10.50am GMT
European customers don't need to do anything, VW will get in touch when it is time to fix their car.
But there is less good news for drivers in the US.
10.47am GMT
Mi1/4ller says VW now has a "robust solution" for all the EA 189 diesel engines involved in the emissions scandal.
That means that:
We can make sure that all the models affected in Europe will have one and the same emissions strategy in the test bed and in real life.
Most of Volkswagen diesel cars will be repaired in second and third quarter of next year
10.42am GMT
Now CEO Matthias Mi1/4ller is speaking, outlining his new five-point plan.
That includes helping customers affected, discovering what went wrong and making necessary changes, renewing VW's structures, renewing mindsets, and evolving strategies to take the company forward.
10.39am GMT
Finally, Pitsch says that nine staff have been suspended so far, and he won't rule out more employees being suspended in future.
10.38am GMT
Looking ahead, Pitsch says that the car sector must clean up its gama and give customers a better ides of what their cars actually emit.
That will need courage, though.
10.35am GMT
Pitsch's explanation shows that the VW scandal goes beyond a few 'bad apples'....
VW crisis not due to "one-off" mistake but "whole chain" of errors says chairman
This is the first time we have heard Volkswagen admit that there was systematic problem at company, rather than just rogue engineers
10.32am GMT
Pitsch now turns to the key question - how did VW end up cheating nitrogen oxide emission tests?
He says it was down to individual staff who concluded that they could "not find a way by permissable means" to meet US emissions limits, under the timeframe and budget they were given.
10.28am GMT
While VW's internal investigation has moved quickly, the external investigation by Jones Day will take much longer to conclude.
That is because the firm is dealing with huge amounts of data - the equivalent of 50m books.
VW investigation has conducted 87 interviews and seized 1,500 devices from 400 employees
10.24am GMT
Pitsch says VW's internal audit has found that the emissions scandal was due to three factors:
10.20am GMT
Volkswagen's internal investigation will conclude soon, but the external inquiry led by the legal firm Jones Day will run "well into 2016".
This is because Jones Day must establish who is legally responsible and its investigation has to stand up in court.
10.18am GMT
10.17am GMT
We are "relentlessly searching" for those responsible for the emissions scandal, declares Pitsch.
And you can rest assured that we will bring those persons to account.
10.13am GMT
Pitsch reminds us that there are two parts to the emissions scandal - nitrogen oxode emissions and CO2 emissions.
On CO2, he confirms the initial fear that 800,000 cars had false emissions levels was incorrect. That is "good news for consumers and Volkswagen".
10.09am GMT
The fallout from the scandal will be considerable, says the VW chairman, Hans Dieter Pitsch. We need to defend our strong market position, but must recognise the scale of the challenge:
We are in the midst of one of the biggest tests in the history of the group.
10.07am GMT
Pitsch speaks first, welcoming reporters to the press conference.
I'm not giving away any secrets when I say the past two-and-a-half months are something that has never been experienced at Volkswagen, he says.
No one here could imagine that our company, where so many people give their best, which is a source of such pride for Wolfsburg, could end up in such a position.
10.02am GMT
The Volkswagen chairman, Hans Dieter Pitsch, and chief executive, Matthias Mi1/4ller, have just arrived for the press conference.
9.54am GMT
It's nearly time for Volkswagen to face the media and discuss the emissions scandal - you can watch it live here from 10am. (I'll try to embed it at the top of the blog too).
9.52am GMT
Ouch. More than 500m has been wiped off Sports Direct's market value this morning.
Analysts are disappointed that underlying profits for the last six months only rose by 3.6%, missing expectations.
Related: Sports Direct shares plunge after revelations about working practices
Overseas operations leave the company battling currency movements, while the group's relationship with its staff remains in the spotlight.
9.42am GMT
Another month, another piece of bad UK trade data.
Ouch! UK ONS: The UK's deficit on trade in goods and services was estimated to have been 4.1 billion in October 2015, #GBP #GDP
A surge in imports of goods pushed up Britain's overall trade deficit to 4.1bn in October, from 3.1bn September: https://t.co/30g6hvhyud
9.30am GMT
Glencore is leading the London stock market, up 10% after announcing a new plan to tackle its debt mountain.
The commodity mining and trading firm has hiked the debt reduction target from $10.2bn to $13bn, and slashed its capital expenditure plans. Asset sales are also likely.
#Glencore shares up 10% as commodities giant widens plan to cut debt, considers possible agricultural business IPO pic.twitter.com/WbmHR2mbFr
9.18am GMT
The VW press conference is the "biggest event" for European markets today, says Conner Campbell of Spreadex.
Yesterday it was revealed that only 36,000 cars (compared to the initially estimated 800,000) have been affected by CO2 emission problems, sending VW's shares about 7% higher.
It will be interesting, then, if the company will have any more good news for investors, or if Wednesday's little nugget of information was merely to soften the blow of whatever it reveals today.
9.03am GMT
Volkswagen shares are rallying, up 3% ahead of this morning's crucial press conference (see opening post for details).
They plunged more than 40% when the scandal broke in September, but have recovered about half those losses since:
8.45am GMT
The chief executive of Sports Direct has declared that he will not step down following our report into work practices at the company's outlets.
That is according to Simon Neville of the Independent and Evening Standard.
Sports Direct boss Dave Forsey tells me he has no plans on resigning after latest revelations.
8.38am GMT
Newsflash from Switzerland - the Swiss central bank has left interest rates unchanged at their current record lows.
That means Swiss rates remain negative at minus 0.75%. That is part of its attempt to keep the Swiss franc (CHF) weak and avoid capital flows out of the eurozone.
*SNB:CHF IS STILL SIGNIFICANTLY OVERVALUED - who cares SNB
8.30am GMT
Whitbread sounded in good spirits this morning.
The firm, which runs Costa Coffee and Premier Inn hotels, posted sales growth of 11% for 2015. Whitbread also pledged to hit its growth targets, despite the challenge from Airbnb.
8.22am GMT
Sports Direct is leading the FTSE fallers this morning.
Related: Revealed: how Sports Direct effectively pays below minimum wage
A number of issues were raised by shareholders at our AGM which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse.
Following a review, the process has been streamlined, which has led to a reduction in waiting time.
8.16am GMT
Europe's stock markets are dropping in early trading, extending recent losses.
The FTSE 100 has shed 20 points to 6106, its lowest level since 16 November.
8.09am GMT
VW has lots of issues to address today, including:
7.47am GMT
Today's pollution scandal press conference will put the Volkswagen chief executive, Matthias Mi1/4ller, in the spotlight.
Matthias Mi1/4ller - the man brought in to steer the company out of a crisis that is expected to cost it countless billions of euros and has left the reputation of the former paragon of German industry in tatters - is scheduled to field questions from the world's media during a news conference at VW's headquarters in Wolfsburg, Germany.
Mi1/4ller has been in the driving seat since the end of September, and was drafted in to replace Martin Winterkorn in the wake of shock revelations that VW systematically installed emissions-cheating software in 11m diesel engines worldwide.
7.37am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, business and the eurozone.
the current status of the clarification process concerning the diesel issue and on the realignment of the group.
Our European opening calls: $FTSE 6095 down 32 $DAX 10527 down 66 $CAC 4604 down 34 $IBEX 9770 down 65 $MIB 21370 down 131
Related: Revealed: how Sports Direct effectively pays below minimum wage
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