Volkswagen Says 11 Million Cars hit by Scandal, Probes Multiply
The automaker will set aside $7.3 billion in its third-quarter accounts to help cover the costs.
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Scandal Rocks Volkswagen
- 11 million of Volkswagen’s cars could be affected, around the globe
- The automaker will set aside $7.3 billion in its third-quarter accounts to help cover costs
- Volkswagen could face penalties of up to $18 billion
- US Justice Department has launched a criminal probe of Volkswagen
- The stock tumbled another 20 percent to a four-year low on Tuesday
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.
— Eric Schneiderman
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.
CEO 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 US or it was not reported to him. 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.
— Arndt Ellinghorst, Analyst, Evercore ISI
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 percent to a four-year low on Tuesday after some countries in Europe and Asia said they would launch investigations themselves.
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