Clean Diesel No More: Volkswagen Scandal Grows

Volkswagen says some 11 million diesel vehicles were equipped with the software that helped them cheat emissions tests worldwide, just days after the EPA ordered the automaker to recall 500,000 vehicles over the deception.

Here’s more from the company’s statement:

To cover the necessary service measures and other efforts to win back the trust of our customers, Volkswagen plans to set aside a provision of some 6.5 billion EUR recognized in the profit and loss statement in the third quarter of the current fiscal year. Due to the ongoing investigations the amounts estimated may be subject to revaluation. Earnings targets for the Group for 2015 will be adjusted accordingly.

Volkswagen does not tolerate any kind of violation of laws whatsoever. It is and remains the top priority of the Board of Management to win back lost trust and to avert damage to our customers. The Group will inform the public on the further progress of the investigations constantly and transparently.

That amount of 6.5 billion euros (about $.7.25 billion) is unlikely to help the automaker’s shares, which lost nearly a fifth of their value on Monday, and fell a further 5 percent Tuesday.

On Monday night, Michael Horn, the president and CEO of Volkswagen Group of America, said the company had “totally screwed up” over the scandal, which has prompted calls for investigations into the world’s second-largest carmaker.

French Finance Minister Michel Sapin called for a “Europe-wide” investigation into diesel cars.

“This is not a minor subject, it’s not about speed or the quality of leather,” he told French media. “What we are dealing with is making sure people avoid being poisoned by pollution.”

South Korea’s Environment Ministry said it would test the diesel models of the Volkswagen Golf and Jetta, as well as the Audi A3.

My colleague Robinson Meyer describes how the “defeat devices,” as the software is being called, worked.

These devices, essentially, let the cars pretend to not break the law. The software could sense when the car was undergoing emissions testing and activate its pollution-control systems accordingly. When the car was being driven during normal use, these systems largely did not activate—making the car a much heavier polluter in real-life than it looked on paper.

With those systems deactivated, the car’s emissions violated the Clean Air Act and California’s state pollution-control regulation.  

And as my colleague Bourree Lam reported, Volkswagen denied the allegations to regulators for years. Volkswagen faces fines of up to $18 billion in the U.S. over the deception, as well as class-action lawsuits. Reuters has the background:

VW, which for several years has been airing U.S. TV commercials lauding its “clean diesel: cars, was challenged by authorities as far back as 2014 over tests showing emissions exceeded California state and U.S. federal limits.

VW attributed the excess emissions to “various technical issues" and “unexpected” real-world conditions.

It wasn’t until the Environmental Protection Agency and the California Air Resources Board threatened to withhold certification for the automaker’s 2016 diesel models that VW in early September revised its explanation.

The scandal has brought into question the performance of Martin Winterkorn, the automaker’s CEO. Some analysts quoted by Reuters note that he might have to step down over the scandal.

A panel of Volkswagen’s supervisory board will discuss the scandal on Wednesday. The full board meets Friday to extend Winterkorn’s contract until the end of 2018.