VW Scandal widens

Volkswagen is being engulfed by a growing crisis over its attempt to make millions of diesel cars appear cleaner than they are.

The scandal broke Friday, when U.S. regulators said the German company had programmed some 500,000 vehicles to emit lower levels of harmful emissions in official tests than on the roads.

Volkswagen stunned investors Tuesday by admitting that the problem was much bigger than that: internal investigations had found significant discrepancies in 11 million vehicles worldwide.
"Millions of people all over the world trust our brands, our cars and our technology. I am deeply sorry we have broken this trust," said CEO Martin Winterkorn. "I would like to make a formal apology to our customers, to the authorities, and to the general public for this misconduct."

The company set aside 6.5 billion euros ($7.3 billion) to cover the cost of recalls and other efforts to limit the damage, trashing its profit forecast for the year in the process.
Shares in Volkswagen (VLKAY) plunged 17% Tuesday, after suffering a similar crash Monday. About a third of the value of the group has been wiped out in two days, causing big losses for major shareholders such as Qatar.

A global problem
"Now it looks like it's becoming a very global issue. It really will be bad for the reputation of the company for a couple of years, it will take time to rebuild the trust of the customers," said Klaus Breitenbach, automotive analyst at Baader Bank. "It's really worrying for the company and also for the whole industry."

It's hard to overstate the significance of the crisis in Germany, where making quality cars is central to the country's reputation as a manufacturing and export powerhouse. The auto industry accounts for about 20% of exports, and employs 775,000 people directly.

Volkswagen, which also owns the Audi and Porsche brands, overtook Toyota (TM) earlier this year to become the world's biggest automaker by vehicle sales.

Related: Are you driving VW diesel? Here's what you need to know
German Chancellor Angela Merkel described the situation at Volkswagen as "difficult" and urged the company to show complete transparency and explain its actions in full. Britain and France have called for a Europe-wide investigation, and Italy wants to know whether it has been affected.
"It is premature to comment on whether any specific immediate surveillance measures are also necessary in Europe and [on] the implications for vehicles sold by Volkswagen in Europe," said a spokesperson for the European Commission.

"But let me be clear: We need to get to the bottom of this. For the sake of our consumers and the environment, we need certainty that the industry scrupulously respects emissions limits."
South Korea said it would investigate whether four VW and Audi models were meeting emissions standards.

Can Volkswagen CEO survive?
Apart from the financial damage -- Volkswagen could in theory face fines of up to $18 billion in the U.S. alone -- the company could lose its CEO over the affair.
Winterkorn, who survived an attempt to remove him earlier this year, made his first apology to customers on Sunday for breaking their trust.

On Tuesday, he said the company couldn't yet explain what went wrong but was working hard to find out. And he appealed to employees for their support.
"I am personally asking you for your trust as we move forward," he said in a video statement.
Some analysts say his position at the top of Volkswagen is threatened by the scandal. The company was forced to deny German media reports that Winterkorn would be replaced on Friday by Porsche CEO Matthias Mueller.
Michael Horn, the head of Volkswagen in the U.S., admitted that the company had "totally screwed up."

"Let's be clear about this, our company was dishonest with the [Environmental Protection Agency], and the California air resources board, and with all of you," Horn said.
Regulators in the U.S. said Volkswagen cheated on environmental standards by programming engine management software in some diesel cars to turn on emission controls only when being tested. Cars equipped with the device would run up to 40 times more emissions when on the road, the EPA said.

Volkswagen has been ordered to recall the vehicles, and the company is halting sales of some cars in the U.S.
The models affected include the VW Jetta, Beetle and Golf from 2009 through 2015, the Passat from 2014-2015 as well as the Audi A3, model years 2009-2015. Owners of the "CleanDiesel" automobiles have filed a class action lawsuit against Volkswagen.

The scandal dragged down shares in other carmakers on fear the fallout could affect the wider industry.
Daimler (DDAIF), the maker of Mercedes-Benz, fell 7%, while BMW (BAMXY) lost 6%. Both companies said the issue is not affecting their cars.

Just days removed from a video statement in which he apologized for the diesel emissions scandal that has rocked VW in the last week, Winterkorn, CEO of the world's largest automaker, has stepped down.

Last Friday, the US Environmental Protection Agency charged that the Volkswagen Group had deliberately fitted nearly half-a-million US diesel vehicles with software designed to circumvent federal air pollution controls. The programming end-run allows vehicles to pass the EPA's test cycle procedures but spew up to 40 times the emissions in real-world use.

Winterkorn has resigned after nearly 10 years at the helm of the world's largest automaker. Volkswagen

The news shocked the auto industry and the world's financial markets, sending Volkswagen's stock into freefall, losing some 35 percent of its value over two days. Subsequently, it was revealed that the cheater software is installed in 11 million cars globally, a revelation that prompted VW to reserve $7.3 billion in funds on Tuesday to cover costs relating to the crisis.

The 68-year-old Winterkorn has been at the helm of Volkswagen for almost a decade, where he cultured a reputation for wielding absolute authority through a combination of ruthlessly savvy boardroom dealings and a legendary attention to detail -- the latter of which may have turned out to haunt him in light of this scandal. Despite -- or because of -- his hardline management style, VW grew mightily under his leadership, becoming the largest automaker in the world by volume of cars produced.

In a statement released on his departure, Winterkorn said that as CEO, he accepts responsibility for the "irregularities" that have been discovered. "I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part," he said. "Volkswagen needs a fresh start -- also in terms of personnel. I am clearing the way for this fresh start with my resignation."

While Winterkorn's exit is an important development in VW's efforts to deal with this diesel emissions catastrophe, it is likely the first of many difficult steps. Not only is the Wolfsburg, Germany, automaker facing $18 billion in potential fines from the US government alone, at least one lawsuit has been filed on behalf of angry VW owners who feel duped and are looking to head off drops in resale value. What's more, all new VW diesel models in US showrooms face a stop-sale order, and the company will have to recall the affected models once a fix can be developed.

Additionally, other countries where VW diesels have been sold are launching their own investigations, and further penalties, recalls and criminal charges are possible.

The Volkswagen supervisory board is scheduled to convene Friday, at which point it is expected to decide who will succeed Winterkorn. Porsche CEO Matthias Müller is rumored to be a top consideration.

It's the one of the most stunning new articles pertaining to a major auto manufacturer, with the exception of Toyota's massive recall due to airbags malfunctioning, GM's massive ignition problem that they ignored, before finally doing something about it, while Ford had a recent recall due to power steering issues in their sedan vehicles.

The question everyone is anxiously awaiting a definitive answer to is, will VW survive the current scandal? If so, how does VW plan on regaining the trust of the auto consumers around the world?
Amid emissions scandal, Volkswagen may have mortally wounded the diesel passenger car market.
Perhaps the worst part of this story is that VW has long exhibited this kind of deceptive behavior.
I’ll get to that in a moment. First, there’s various talk around the Web as to what’s going to happen next: How will VW fix the existing cars? Will it degrade their performance or just cost VW tons of money? Will VW give up and offer to buy back the cars entirely?

 Will the company just offer everyone $100 off on their next VW and generate even more anger and bad will? There will certainly be class-action lawsuits on top of the legal trouble the company is already in. All of this raises questions of who exactly is going to want to buy these cars when all is said and done, and what it’s going to do to the overall image of diesel in America once more.

In short, there's no easy way out of this mess---not just for Volkswagen, but for the 500,000
customers in this country who purchased a new generation (2009 or newer) TDI vehicle on the grounds of its torque low-end performance, stellar highway fuel economy, and long range between fill ups. For example, if you purchased the because of its fuel economy, and resultant lower C02
emissions that contribute to the greenhouse gases that cause global warming, you won't be thrilled to find out you've been polluting the atmosphere in an entirely different manner all this time. If you purchased the car because of its performance characteristics, whatever VW does next to fix the problem in the recall could lower that performance and/ or curtail its fuel economy numbers.

BMW, Mercedes, and others have found ways to deliver on diesel's promise while staying ahead of emissions requirements. So the technology isn't necessary hopeless for passenger cars. Hopefully we won't find out BMW and Mercedes cheated too, though given the much higher price of those cars, it's doubtful they needed to.

Regardless, the story here for VW is far from over. Granted, there will always be diesel trucks on the road until someone develops a more advanced way to transport untold tons of cargo across the country, and trucks have looser emissions restrictions anyway. And the tinkerers who chip or otherwise modify their car's engine performance never cared about NOx emissions in the first place.
But a story this horrendous, and this damaging to the image of "clean diesel" as an alternative, environmentally safe fuel for the 21st century, already has far-reaching implications and could very well lead to the death of diesel in passenger cars in the U.S. once again.

Here we thought the days of sotty, clattering early 80's diesel cars were long gone. Turns out all you need to do is cheat on your emissions tests.