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Emissions Scandal Rocks Volkswagen; US Widens Probe

US authorities will widen the probe to other automakers.

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Volkswagen shares plunged by nearly 20 percent on Monday after the German carmaker admitted it had rigged emissions tests of diesel-powered vehicles in the United States, and US authorities said they would widen the probe to other automakers.

German officials, alarmed at the potential damage the scandal could inflict on its car industry, urged Volkswagen to fully clear up the matter and said it would investigate whether emissions data had also been falsified in Europe.

You will understand that we are worried that the justifiably excellent reputation of the German car industry and in particular that of Volkswagen suffers.
— Sigmar Gabriel, German Economy Minister

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Snapshot

Tests Unravel ‘Clean Diesel’ Strategy

  • Carmaker used software that deceived regulators measuring toxic emissions
  • Volkswagen could face penalties of up to $18 billion
  • US authorities to test diesel vehicles from other manufacturers for similar violations

The US Environmental Protection Agency (EPA) said on Friday that Volkswagen, the world’s biggest carmaker by sales, used software that deceived regulators measuring toxic emissions and could face penalties of up to $18 billion.

The scandal reverberated on Monday with the White House saying it was “quite concerned” about the reports of VW’s conduct. The US Department of Justice started a criminal probe of the effort to game the emissions tests, according to press reports.

The EPA and California officials said they would test diesel vehicles from other manufacturers for similar violations. In addition to Volkswagen, automakers including General Motors and Fiat Chrysler Automobiles sell diesel cars and SUVs in the United States.

EPA spokeswoman Liz Purchia said the agency would be “working closely” with the Department of Justice on the probe but she would not comment about the possibility of a criminal probe.

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The alleged attempt to fool the emissions tests also attracted congressional notice, with a House of Representatives panel planning a hearing in the coming weeks.

Shares of VW, whose vehicles range from budget Seats and Skodas to luxury Bentleys and Lamborghinis, fell 18.6 percent to close at 132.20 euros, wiping some 14 billion euros ($15.6 billion) off its market cap.

Volkswagen Chief Executive Martin Winterkorn has promised to support testing by German authorities of the company’s diesel cars, Germany’s Transport Ministry said on Monday.

Winterkorn said on Sunday he was “deeply sorry” for the breach of US rules and ordered an investigation.

“This disaster is beyond all expectations,” said Ferdinand Dudenhoeffer, head of the Center of Automotive Research at the University of Duisburg-Essen.

Analysts said it was unclear what the ultimate cost could be for VW, which reported 2014 net income of 10.84 billion euros ($12.15 billion), according to Thomson Reuters data.

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