Six months into 'Dieselgate' scandal, gloom deepens in Volkswagen's hometown

WOLFSBURG - When Martin Winterkorn dropped by to order some new glasses in the Volkswagen company town of Wolfsburg, he was "visibly dejected", according to his optician. But the visit wasn't last September, when Winterkorn had just quit as the German carmaker's chief, it was this week. Six months into the "Dieselgate" affair surrounding VW, the mood in Wolfsburg - where a workforce equal to almost half the town's population is employed at its giant car factory - is as gloomy as Winterkorn's, and shows little sign of recovering. Volkswagen remains mired in the scandal over its rigging of US exhaust emissions tests, facing a barrage of lawsuits and grappling with a stalled German vehicle recall. With workers fearing for their jobs and the dive in VW's fortunes hitting Wolfsburg's municipal finances, few people see any light at the end of the tunnel. This appeared to include 68-year-old Winterkorn when he visited optician Ehme de Riese on March 14. "Winterkorn was visibly dejected," de Riese told Reuters. "He is haunted by the question of what will happen to his life's work and to the Volkswagen company." Winterkorn was on a fleeting visit - de Riese said the engineer has moved to Munich since the scandal ended his long career at the firm which has its headquarters in Wolfsburg. De Riese runs three branches in Wolfsburg, and supplies glasses to half of VW's executive board. As such, he fears that heavy penalties could force VW to scale back operations in the town, which lies about 200 km (120 miles) west of Berlin. To boost morale, he has spent 30,000 euros on pro-VW newspaper advertisements and badges which are plastered all over his central branch on the Porschestrasse, Wolfsburg's main shopping street which is named after Ferdinand Porsche - creator of the iconic VW Beetle. PAINFUL SETBACK Not all is bad. Deliveries across the VW group swung back into growth in January and February, helped by incentives to buyers, after falling for the first time in years in 2015. But the feeling among businessmen and workers is that things now look even worse than in December, when three months after the revelations of the test rigging, VW finally held its first news conference on the crisis. Since then, the US government has sued VW for up to $46 billion for violating environmental rules and extended its inquiries to cover bank fraud law, while a flood of private and investor lawsuits has swept in. Then this week, Germany's KBA motoring regulator said it was holding up a recall of VW Passats that is intended to make them comply with emissions regulations. This is a painful setback for VW, which in November touted its simple emissions fix for 8.5 million cars in Europe as a precursor to pulling out of the crisis. Even Moody's, which still has a relatively positive opinion of Volkswagen compared with its fellow credit rating agencies, is prepared for things to get worse. "The emissions issue is likely to have a number of adverse effects on Volkswagen's future earnings and cash flows, which may only become visible over time," Matthias Hellstern, managing director of Moody's corporate finance team in Frankfurt, said. -Reuters