VW admits 11 mln cars have pollution cheating device

FRANKFURT - Agence France Presse

People arrive for work through the main gate of the headquarters of German car maker Volkswagen in Wolfsburg, central Germany, on September 23, 2015. AFP Photo

Volkswagen’s pollution cheating scandal escalated dramatically 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.     

As the United States opened a criminal investigation into Volkswagen, chief executive Martin Winterkorn offered his “deepest apologies” for the scandal which threatens to tarnish Germany’s pristine industrial reputation.     

“I am infinitely sorry that we have disappointed people’s trust. I offer my deepest apologies to our customers, the authorities and to the public at large for our misconduct,” the 68-year-old executive said in a video statement and promised to be “ruthless” in getting to the bottom of the scandal.

The “irregularities... contradict everything that our company stands for,” Winterkorn said. “Manipulation must never again occur at Volkswagen.”   

The German firm has halted all diesel vehicles sales in the United States during the US probe, which could lead to fines amounting to a maximum of more than $18 billion.

Authorities from France to South Korea also said they would investigate the affair, prompting Volkswagen to announce that it was setting aside 6.5 billion euros ($7.3 billion) in provisions for the third quarter to cover the potential costs of the scandal.             

When U.S. authorities announced last week that special software on VW diesel vehicles drastically reduced output of pollutants when they were undergoing emissions tests they said it concerned nearly half a million vehicles sold in the United States.

“Further internal investigations have shown that the software concerned is also installed in other diesel vehicles,” VW said in a statement.     

25 bln euros in loss

“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, whose parent company also owns brands including Audi, Skoda and Lamborghini, is hard to measure.  German Chancellor Angela Merkel called on the company to show “full transparency” to clear up the matter.

Chief executive Martin Winterkorn’s job is now believed to be hanging in the balance, as senior supervisory board members were reportedly meeting to discuss his dismissal.

The German news agency DPA said the supervisory board’s six-member steering committee met late on Sept. 22, and was scheduled to reconvene again on Sept. 23.  But no information has emerged about any decisions taken at the talks, DPA said.     

The regional Hannoversche Allgemeine Zeitung earlier said Winterkorn had lost the confidence of major shareholders.

An AFP photographer saw cars with tinted windows entering the Volkswagen headquarters in Wolfsburg in the morning but it was impossible to say whether they were joining the board meeting.

The shockwave of the scandal has slashed VW’s market capitalization by about 25 billion euros to 51 billion euros in just two days, although Volkswagen’s share market nightmare showed the first signs of lifting on Sept. 23 as its stock steadied a little in early trade in Frankfurt, following a two-day freefall.   

In addition to the environmental probe already under way, the U.S. Department of Justice has launched a criminal investigation, a source told AFP.     

The investigation is being led by the US Justice Department’s environment and natural resources division, the source said, speaking on condition of anonymity and confirming media reports.