The Volkswagen pollution cheating scandal escalated dramatically on Tuesday when the automaker revealed 11 million of its cars worldwide could be affected, wiping a third off the company’s market value and threatening to topple its chief executive.
In a statement, the German company said it was setting aside around 6.5 billion euros ($ 7.3 billion) to cover the fallout from the scandal that is tarnishing VW’s reputation for probity, raised questions over the future of its CEO Martin Winterkorn and seriously undermining its share price.
In the wake of its statement, VW’s share price was down another 18.7 per cent at 108.75 euros and near a four-year low. The fall comes on top of Monday’s hefty 17 per cent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading.
The US boss of Volkswagen, Michael Horn, said they had “totally screwed up” emissions testing, adding “Our company was dishonest with the EPA and the California air resources board, and with all of you, and in my German words, we have totally screwed up.”
Meanwhile, the United States has opened a criminal probe against Volkswagen, a source close to the probe said.
Volkswagen’s reputation as a byword for quality and reliability lies in tatters, according to the German press. The German paper Bundesdeutsche Zeitung said: “‘Made in Germany’ in the gutter”.
Meanwhile, the United States has opened a criminal investigation into Volkswagen, a source close to the probe said.
When the manipulation of pollution tests was first publically revealed on Friday, the US authorities said it concerned nearly half a million diesel vehicles in the United States manufactured by the Volkswagen group.
“Further internal investigations have shown that the software concerned is also installed in other diesel vehicles,” VW said in a statement.
“Anomalies have shown up in around 11 million cars worldwide that are equipped with a specific engine type,” added the car manufacturer, the world’s biggest by sales in the first half of this year.
“In order to cover the necessary service and other measures to win back customer confidence, VW plans to set aside 6.5 billion euros in provisions in the third quarter. The group’s earnings targets for 2015 will be adjusted accordingly.”
The impact on the reputation of Volkswagen and other carmakers is hard to measure.
German Chancellor Angela Merkel called on the VW to show “full transparency” to clear up the matter. “I hope the facts will come to light as soon as possible,” she told reporters in Berlin.
The regional daily Tagesspiegel said his dismissal had already been decided by the steering committee of car maker’s supervisory board and would be officially sealed at a meeting of the full 20-member board this Friday.
US regulators have ordered Volkswagen to fix the defective vehicles and launched an investigation.
The German firm has halted all diesel vehicle sales in the United States during the US probe, which could lead to fines amounting to a maximum of more than USD 18 billion.