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The fallout is still expanding a couple of days after the bombshell admission from Volkswagen – after being caught out by US authorities – that it knowingly cheated on its diesel car disclosed emission levels. Now the 480 000 Audis and VWs sold in America have become only part of the problem. As other governments around the world launch their own investigations, it is growing increasingly apparent that more than 11m vehicles were fraudulently sold. Volkswagen is the biggest German investor in South Africa, having operated a plant in Uitenhage in the Eastern Cape since 1951 which employs 6 000 and produces 116 000 VW Golfs annually of which “a large proportion are exported”. Ironically, the SA business boasts about an initiative called ‘Think Blue. Factory.’ which it describes as a plan to reduce the environmental impact of the plant by 25% in the next three years. In the light if the diesel emission cheating, rings rather hollow, doesn’t it? – Alec Hogg
The global car industry was thrown into turmoil yesterday as Volkswagen said up to 11m of its vehicles could be affected by the growing diesel emissions scandal and governments worldwide launched investigations into the company.
Shares in carmakers in Europe and the US tumbled, as investors worried that the scandal could draw in other carmakers and threaten the future of diesel technology – already under fire from policymakers concerned about air quality in Europe.
The Stoxx Europe 600 autos index was down 7.6 per cent – the sharpest one-day fall since August 2011. Shares in General Motors, Ford and Fiat Chrysler also plunged.
Martin Winterkorn, VW chief executive, vowed to fight on, saying in a video statement that he was “endlessly sorry” that the carmaker had betrayed the trust of its customers but would do everything in his power to restore faith in one of Germany’s proudest industrial companies.
He was speaking four days after US regulators revealed that VW had used “defeat devices” to cheat US emissions tests for its diesel cars, opening itself to multibillion-dollar fines and possible criminal charges. The scandal is threatening to become the most serious in the company’s 78-year history.
Meanwhile, as the French and German governments announced inquiries into VW, the company – which is already being investigated by the US Justice Department and Environmental Protection Agency (EPA) – found itself in the crosshairs of authorities in some US states.
State attorneys-general in New York, California and elsewhere are forming a multistate group to look into the scandal, focusing on both the alleged deceptive practices at VW as well as potential violations of environmental regulations.
Eventually, most of the 50 states in the US could become involved because the VW vehicles in question are so widely sold, people familiar with the matter said.
“No company should be allowed to evade our environmental laws or promise consumers a fake bill of goods,” New York Attorney General Eric Schneiderman said, confirming his office’s investigation on Tuesday. “We look forward to collaborating with Attorneys General across the nation on this matter.”
Bill Nelson of Florida, the top Democrat on the Senate Commerce Committee, wrote to the Federal Trade Commission, calling on the agency to explore compensation for VW buyers who relied on the company’s marketing of clean diesel vehicles. Two committees in the House of Representatives have also called for hearings.
VW’s shares tumbled nearly 20 per cent for a second day after it revealed it would set aside €6.5bn in its third-quarter accounts to cover the costs of the scandal. Its market capitalisation had shrunk by about €25bn in the past two days.
Shares in European carmakers such as BMW, Daimler and Renault also fell sharply on Tuesday. US automakers were also hit, with General Motors falling 3 per cent, Ford 4 per cent and Fiat Chrysler 6 per cent in morning trading in New York.
In the video statement, Mr Winterkorn did not discuss his future. But storm clouds are already gathering over the chief executive ahead of a meeting of senior VW directors scheduled for Wednesday. The meeting may be brought forward.
A fund manager with a large stake in Volkswagen said that if an internal investigation revealed that Mr Winterkorn knew about the defeat devices, “then VW can hardly keep [him] as chief executive”.
“Do we think he is able to get back the reputation and trust of managers and investors and customers and suppliers and dealers? That’s questionable,” he said. “It’s much easier to make a new start with new management.”
The German government said it had set up an official commission of inquiry into the VW affair, headed by Michael Odenwald, a junior transport minister. It will travel to VW’s Wolfsburg headquarters this week to hold talks with the company and seek access to documents.
“Made in Germany” becomes a joke #Volkswagen
— AnemosNaftilos (@AnemosNaftilos) September 22, 2015
At the same time, Ségolène Royal, French environment minister, announced a “full investigation” into VW and into whether the German group used the same software in its diesel cars in France. She also asked French manufacturers to “ensure that such acts have not been happening in France”. The European Commission waded in too, saying it was in close contact with Volkswagen and that the US and German authorities and would discuss further inquiries at a meeting with national test approval authorities. “We need to get to the bottom of this. For the sake of our consumers and the environment, we need certainty that industry scrupulously respects emissions limits,” the commission said.
VW disclosed on Tuesday that the same engine management software that deceived US regulators was also installed in other VW group vehicles with the diesel engine in question, indicating that up to 11m cars could be affected. The statement highlights how the scope of the scandal has expanded dramatically since last Friday, when the EPA first disclosed that VW had cheated on the tests. The EPA ordered the recall of 482,000 diesel-powered vehicles that VW had sold in the US over the past six years.
Volkswagen cars had software to fox pollution control regulators. Now I realise why Volkswagen is pronounced as Foxwagen — The Bad Doctor (@doctoratlarge) September 23, 2015
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Authorities will be keen to know how much senior executives at VW knew of the defeat devices. A German politician and VW board member said on Tuesday that heads were certain to roll over the crisis.
“I am sure that in the end there will be consequences for personnel; there is no question about it,” said Olaf Lies, economy minister for the German state of Lower Saxony, speaking to German radio station Deutschlandfunk. Lower Saxony is a significant VW shareholder, holding 20 per cent of the company’s voting rights.
(c) 2015 The Financial Times Ltd.
- Click here to see the New York Times article showing how VW got away with the deception for so long.
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