Volkswagen says 11 million cars hit by scandal, probes multiply

A Volkswagen car is pictured during a test at a technical and testing centre in Zenica, Bosnia and Herzegovina, 23 September. Volkswagen Chief Executive Martin Winterkorn faces a reckoning with his board on Wednesday, summoned to explain the falsification of US emissions tests in the biggest scandal in the 78-year history of the world’s largest carmaker. The US Environmental Protection Agency (EPA) said on Friday Volkswagen could face penalties of up to $18 billion for cheating emissions tests on some of its diesel cars – Reuters

Volkswagen AG said a scandal over falsified US vehicle emission tests could affect 11 million of its cars around the globe as investigations of its diesel models multiplied, heaping fresh pressure on CEO Martin Winterkorn.

The world’s largest automaker said it would set aside 6.5 billion euros ($7.3 billion) in its third-quarter accounts to help cover the costs of the biggest scandal in its 78-year-history, blowing a hole in analysts’ profit forecasts.

It also warned that amount could rise, saying diesel cars with so-called Type EA 189 engines built into Volkswagen models worldwide had shown a “noticeable deviation” in emission levels between testing and road use.

The US Environmental Protection Agency (EPA) said on Friday Volkswagen could face penalties of up to $18 billion for cheating emissions tests. In addition, the US Justice Department has launched a criminal probe of Volkswagen, a source familiar with the matter said.

The investigation is likely to examine not only possible violations of the Clean Air Act but also of broader statutes against wire fraud, false statements to regulators and other crimes, former prosecutors not involved with the investigation said. A Justice Department spokesman declined to comment.

New York and other state attorneys general are also forming a group to investigate, New York Attorney General Eric Schneiderman said.

“No company should be allowed to evade our environmental laws or promise consumers a fake bill of goods,” Schneiderman said in a statement.

The crisis has sent shockwaves through Germany, with Chancellor Angela Merkel calling for “complete transparency” from a company long seen as a symbol of the country’s engineering excellence.

Winterkorn was due to have his contract extended at a supervisory board meeting on Friday but is now facing questions about whether he knew about the automaker’s use of software that deceived US regulators measuring toxic emissions in some of its diesel cars.

“Winterkorn either knew of proceedings in the U.S. or it was not reported to him,” Evercore ISI analyst Arndt Ellinghorst said. “In the first instance, he must step down immediately. In the second, one needs to ask why such a far-reaching violation was not reported to the top and then things will get tough too.”

Volkswagen’s executive committee plans to meet on Wednesday to discuss the emissions test scandal and the agenda of a full board meeting long scheduled for Friday, sources familiar with the plans said.

A story in the Tagesspiegel newspaper - denied by Volkswagen - said the board would replace the 68-year-old Winterkorn with Matthias Mueller, the head of the automaker’s Porsche sports car business.

Winterkorn did not mention his future in a video message posted on the company’s website in which he repeated his apology for the scandal.

Volkswagen stock tumbled another 20% to a four-year low on Tuesday after some countries in Europe and Asia said they would launch investigations themselves. Preference shares were down 19.7% at 106.1 euros at 1500 GMT.

At the lowest point, the declines in the preference and ordinary shares wiped more than $30 billion off the company’s market value.

Volkswagen was challenged by authorities as far back as 2014 over tests showing emissions exceeded California state and US federal limits but held off on admitting wrongdoing until regulators threatened to withhold certification for its 2016 diesel models that Volkswagen in early September.

In the United States, where diesel vehicles make up much less of the market than in Europe, Volkswagen is a dominant player in the segment, accounting for about one fifth of diesel light vehicles sold last year, according to auto industry consultant LMC Automotive.

Ward’s Auto, another consultant and publisher, said diesel vehicles made up 2.6% of the U.S. new car market so far this year, compared with 2.3% for electric-gasoline hybrid vehicles, also known for superior fuel efficiency.

Volkswagen has spent $77 million so far this year on U.S. TV commercials lauding its “clean diesel” cars, out of $164 million budgeted for advertising thus far overall, according to iSpot.tv, a Bellevue, Washington-based company that tracks TV ads.

Volkswagen has not made a decision on whether or not to pull its ads, a spokeswoman said.

Winterkorn has built Volkswagen into one of the world’s top-selling brands since he took the helm in 2007, with brands ranging from budget Seats and Skodas to premium Audis and top-end Lamborghinis and Bugattis.

But he has also faced criticism for a centralised management style which some analysts say has hampered the company’s efforts to address long-standing underperformance in North America.

Workers in Wolfsburg, where Volkswagen employs over 50,000 people, were dismayed by the damage to the company’s image. “If Winterkorn knew of the manipulation, then he must go,” said one staffer who works in human resources at the plant.

Clarification needed “as soon as possible” in Volkswagen scandal: German FM Steinmeier

​Germany’s Foreign Minister, Frank-Walter Steinmeier, on Tuesday (22 September) demanded clarification of the scandal engulfing Volkswagen AG which has admitted cheating diesel vehicle emissions tests in the United States.

Problems for VW have spread east as South Korea said it would investigate three of the maker’s diesel models.

“I hope that there will be clarification as soon as possible to which extent data has been manipulated by technical means, and especially about the people responsible. That is - and that must be - in the interest of Volkswagen, and then we will have to talk about this issue between the company and the responsible authorities in the US in terms of how to come to terms with this,” Steinmeier said during an official visit to Sri Lanka.

The South Korean probe will involve 4,000 to 5,000 Jetta, Golf and Audi A3 vehicles produced in 2014 and 2015, Park Pan-kyu, a deputy director at South Korea’s environment ministry, told Reuters.

Volkswagen shares plunged by 19 percent on Monday (21 September) after the US Environmental Protection Agency (EPA) said on Friday that the world’s biggest carmaker by sales used software that deceived regulators measuring toxic emissions and could face penalties of up to $ 18 billion.

Media reports say the US Department of Justice has started a criminal probe into the allegations, which cover several VW and Audi-branded diesel models including the Audi A3, VW Jetta, Beetle, Golf and Passat.