What's going on?

On Thursday, Volkswagen (VW) released the preliminary findings of an internal investigation into the emissions scandal�that rocked the company earlier this year. The report comes at a time when the company appears to be on the road to recovery with the stock up 40% since its trough in October!

What does this mean?

The report is essentially trying to clarify how this scandal happened. A decade ago its management saw an opening in the US for diesel-powered cars � something that was popular in Europe but had not caught on in the predominantly gasoline-powered US market. Unfortunately, its diesel engine wasn�t able to meet America�s strict emissions standards (perhaps one reason why diesel engines hadn�t caught on�). So VW installed a device that gave out a falsely low emission reading when the cars were being tested.

Why should I care?

Bigger Picture: Strong Chinese auto sales provided some relief for VW. Car sales in China rose almost 24% in November versus last year. China is VW�s biggest market; so if the rebound in Chinese auto sales is sustained, it couldn�t be coming at a better time for VW. For the stock: Lots of good things have happened lately for VW. For one, a lot fewer cars were affected by a different emissions problem, for which it had set aside a large sum of money. Also, it recently secured a huge �20 billion loan to help it cover costs from the scandal so that it, probably, won�t have to sell any of its brands (like Porsche, for example) or sell more stock to investors. While US sales were hit hard recently, they only make up less than 10% of VW�s sales. The ultimate cost of the scandal still remains difficult to predict (some have suggested it could be �30 billion), so they are not in the clear, but investors seem to think the stock is on firmer footing.