Berlin - Volkswagen shares plunged by nearly 20 percent on Monday after the carmaker admitted it had rigged emissions tests of diesel-powered vehicles in the United States, and US authorities said they would widen their probe to other car companies.
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.
The US Environmental Protection Agency (EPA) has accused VW of using software, in diesel-powered VW and Audi vehicles, that deceived regulators measuring toxic emissions. The company could face penalties of up to $18 billion (R242bn).
The EPA and California officials said that they would test the use of software in diesel vehicles from other manufacturers for similar possible violations. In addition to Volkswagen, carmakers such as General Motors and Fiat Chrysler also sell diesel cars in the US.
“You will understand that we are worried that the justifiably excellent reputation of the German car industry and in particular that of Volkswagen suffers,” German Economy Minister Sigmar Gabriel said.
Germany's transport minister was due to discuss the issue with Volkswagen Chief Executive Martin Winterkorn on Monday, two government sources said.
Winterkorn said on Sunday he was “deeply sorry” for the breach of US rules and ordered an investigation. People including a VW supervisory board member said Winterkorn may have to resign.
“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 whether other carmakers had also broken rules or what the ultimate cost could be for VW, which reported 2014 net income of $12.15 billion (R163bn) according to Thomson Reuters data.
German rivals Daimler and BMW said the accusations made by US authorities against VW did not apply to them.
Industry experts predicted the scandal would hit VW hard, just as it was hoping to move on from a damaging leadership battle, with a supervisory board meeting on Friday due to discuss a new company structure and management line-up.
Winterkorn, who saw off a challenge to his authority with the ousting of long-time chairman Ferdinand Piech, ran the VW brand between 2007 and 2015, including the six-year period when some of its models were found violating US clean air rules.
“DEFEAT DEVICE”
Evidence of increased toxic emissions at VW first emerged in 2014, prompting the California Air Resources Board (CARB) to start investigating VW, a letter by CARB to VW dated September 18 showed.
CARB told VW in July that its own testing of vehicles still showed excessive nitrogen oxide emissions, leading VW to admit on September 3 that it had used a “defeat device” to temporarily lower emissions when it detected that it was being inspected.
Emissions would then return to a much higher level, allowing the car to perform better when driven.
Volkswagen denied it was trying to game the inspections, attributing the higher emissions readings to “various technical issues and unexpected in-use conditions,” the EPA said in its formal notice of violations on Friday.
The stonewalling continued until the agency threatened to withhold certification for the carmaker's 2016 models, the EPA said. “Only then did VW admit it had designed and installed a defeat device.”
Any decision on emissions control mechanisms would have been taken at the group's Wolfsburg headquarters and not by regional divisions, a source close to Volkswagen said.
Germany's Robert Bosch supplies diesel emissions control devices to VW, an industry source said. Asked whether Bosch had supplied the electronic module central to the EPA test findings, a company spokesman said: “We supply components for exhaust after-treatment to several manufacturers. The integration is the responsibility of the manufacturer.”
“CARMAKERS USING LOOPHOLES”
The way carmakers test vehicles has been coming under growing scrutiny from regulators worldwide amid complaints from environmental groups that they use loopholes in the rules to exaggerate fuel-saving and emissions results.
In 2013, an Indian government-named panel accused GM of flouting testing regulations by fitting engines with low emissions in vehicles sent for inspection. And in 2014, Hyundai and affiliate Kia paid $350 million (R4.7bn) in penalties to the US for overstating fuel economy ratings.
The European Commission said it was in contact with VW and US regulators, but that it was too early to say whether any specific immediate surveillance measures were needed in Europe or whether VW vehicles in Europe were also affected.
WHAT THIS ALL MEANS FOR VW
Ingo Speich, a fund manager at Union Investment that owns about 0.4 percent of VW shares, said he was braced for the crisis to spread for the carmaker.
“The market is anticipating more than just the US issue. We have to admit that just looking at the facts there is a huge loss of trust in management,” he said.
Exane BNP analysts said VW's problems could have wider implications for diesel vehicles, which have long struggled to gain a foothold in the US market.
Bernd Osterloh, the head of VW's works council and a supervisory board member, called for those responsible to be held accountable. He said Winterkorn would resign should investigations prove he was personally responsible.
The carmaker's second-largest shareholder, the German state of Lower Saxony, said, however, that decisions would have to wait until the crisis had been “fully and thoroughly” examined.
As well as regulatory fines, analysts said VW could be hit by a drop in sales and lawsuits from shareholders and environmental groups.
The company has already told its US dealers to stop selling the diesel models criticised by regulators, while Keller Rohrback LLP has filed a nationwide class action complaint against VW's US division, saying it deliberately deceived consumers and regulators in its emissions testing.
Reuters