Volkswagen said it lost 1.67 billion euros ($1.83 billion) for the third quarter as it set aside 6.7 billion euros to pay for recalling and fixing cars that were rigged to evade U.S. diesel emissions tests.
The company warned Wednesday that operating profit this year would be "down significantly" as a result of the scandal.
But it stayed with its prediction that unit sales would be on a level with last year's record 10.14 million.
The company's ordinary shares rose 1.9 percent to 124.15 euros in afternoon trading in Europe.
Volkswagen AG, based in Wolfsburg, Germany, had already announced the set-asides for the recalls, so market analysts expected the quarterly loss, the company's first in over a decade. The result was in fact not as bad as analysts' expectations for a loss of 2.11 billion euros, as compiled by financial data provider FactSet. Sales revenue rose 5.3 percent to 51.5 billion euros.
Chief Financial Officer Frank Witter said the company had "solid and robust" cash resources to meet the financial impact of the emissions scandal. The cash reserves have been buttressed by 3 billion euros from the sale of shares in Suzuki. The cost "is enormous but manageable," he said.
Analysts say the impact will likely be several times larger than the set-asides, including fines, recall and repair costs, and possible lost sales due to damage to the company's reputation.
The scandal became known on Sept. 18, near the end of the quarter, so any impact on quarterly sales was slight.
The U.S. Environmental Protection Agency says Volkswagen installed software on 482,000 cars from model years 2009-2015 that disabled diesel engine emission controls when the vehicles were not being tested. Up to 11 million cars worldwide have the deceptive software.
The scandal spoiled what would otherwise have been a profitable quarter, with 3.2 billion euros in earnings excluding interest, taxes and the scandal set-asides. The scandal has cost Volkswagen the position as the biggest automaker in the world by sales, which Toyota has regained.
"The figures show the core strength of the Volkswagen Group on the one hand, while on the other the initial impact of the current situation is becoming clear," said CEO Matthias Mueller. "We will do everything in our power to win back the trust we have lost."
Mueller said the company needed to place less emphasis on raw sales numbers and become more open and leaner to help prevent any repeat of the scandal.
He said the company would rework its Strategy 2018, which set as a goal passing Toyota as the world's largest automaker. "It's not about selling 100,000 more or less than a big competitor," he said. The goal was achieved for several months this year but then lost due to the scandal.
Mueller said some of the goals from the earlier plan — profitability and customer satisfaction — were more important than ever. He said the company would come up with a Strategy 2025 by the middle of next year.