11 million cars, 11 million lies

Frankfurt

German auto giant Volkswagen revealed yesterday that 11 million of its diesel cars worldwide are equipped with devices that can cheat pollution tests, a dramatic escalation of the scandal that has wiped a third off the company's market value and now threatens to topple its chief executive. 

Authorities from France to South Korea to the United States announced investigations and threatened legal action, prompting Volkswagen to announce that it was setting aside 6.5 billion euros ($7.3bn) in provisions for the third quarter to cover the potential costs of the scandal. 

VW shares, which dived 17 per cent on Monday, plunged by another 23pc to a low of 101.30 euros during trade on the Frankfurt stock exchange as the automaker's new revelations, including a warning that it will have to lower its profit outlook, sent investors fleeing.

When the manipulation of pollution tests was first publically revealed on Friday, the US authorities said it concerned nearly half a million diesel vehicles in the United States manufactured by the Volkswagen group.

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

"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 6.5bn euros in provisions in the third quarter. The group's earnings targets for 2015 will be adjusted accordingly."

The  scandal has led to France calling for a Europe-wide probe into the revelations, South Korea summoning Volkswagen officials, and the US Justice Department reportedly launching a criminal investigation.

The impact on the reputation of Volkswagen and other car makers is hard to measure. 

German Chancellor Angela Merkel called on the VW to show "full transparency" to clear up the matter. "I hope the facts will come to light as soon as possible," she told reporters in Berlin.

Industry experts say VW chief executive Martin Winterkorn's job is on the line.

The regional daily Tagesspiegel said his dismissal had already been decided by the steering committee of car maker's supervisory board and would be officially sealed at a meeting of the full 20-member board this Friday. 

US regulators have ordered Volkswagen to fix the defective vehicles and launched an investigation.

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

The shockwave of the scandal has slashed VW's market capitalisation by about 25 billion euros to 51 billion euros in just two days. 

Other automobile stocks were also dragged lower with Daimler shares down 7.03 percent and BMW shedding 7.17 percent on Tuesday. 

According to the US authorities, VW has admitted that it had equipped about 482,000 cars in the United States with sophisticated software that covertly turns off pollution controls when the car is being driven and turns them on only when it detects that the vehicle is undergoing an emissions test.

In Germany, the government has already launched an investigation into whether Volkswagen or other car makers are doing anything similar in Germany or Europe.

The German daily Frankfurter Allgemeine Zeitung reported that the national supervisory authorities had alerted VW to discrepancies in the emissions data in May 2014 and some cars were even recalled.

But environment protection groups, particularly in Germany, suspect other car makers may be using similar technology. 

The EPA said Monday that it will screen for defeat devices in other manufacturers' diesel vehicles now on the road, though it declined to identify the automakers whose vehicles will be tested.

 ‘Premature' to probe

 Brussels

The EU on Tuesday said it was too early to launch a European investigation into whether Volkswagen has cheated in pollution measuring tests after shock revelations in the United States.

"We are taking the matter very seriously," European Commission spokeswoman Lucia Caudet said in an email to AFP, adding that Brussels was in touch with Volkswagen and US authorities.

"Investigations are ongoing within Volkswagen as well as in the US and in Germany. Therefore, it is premature to comment on whether any specific immediate surveillance measures are also necessary in Europe and whether vehicles sold by Volkswagen in Europe are also affected," she said.

"We need to get to the bottom of this," she added.

 We 'screwed up'

 Volkswagen America's chief executive, Michael Horn, said the company "totally screwed up," candidly admitting wrongdoing after the German car giant was caught cheating in US pollution measuring tests.

Horn pledged late Monday to "make things right with the government, the public, our customers, our employees and also very important, our dealers."

"Our company was dishonest, with the EPA and the California Air Resources board, and with all of you and -- in my German words -- we have totally screwed up," Horn said at an event in New York.

Speaking at an event to launch the 2015 Passat, Horn said Volkswagen was "damn committed" to turning the scandal into an opportunity to learn and improve, adding the company's future depended on it. 

Horn also said VW would pay what it has to. 

 CEO may exit on Friday

 Volkswagen chief executive Martin Winterkorn could reportedly be relieved of his duties by the automaker's supervisory board in the wake of the pollution cheating scandal, the regional daily Tagesspiegel said on Tuesday. 

Winterkorn, 68, who earlier this year successfully averted a campaign by then supervisory board chief Ferdinand Piech to remove him, no longer enjoyed the board's confidence, the newspaper said, quoting "supervisory board sources." 

The board's six-member steering committee would meet Wednesday and Winterkorn's fate could be officially decided by the full 20-strong board on Friday, the paper reported.

Winterkorn, who has served as CEO since 2007, would reportedly be replaced by Matthias Mueller, head of VW's luxury sports car arm Porsche, it added. 

Volkswagen was not immediately available to comment on the report. 

 Renault, Nissan not worried 

 Carlos Ghosn, head of France's Renault and Japan's Nissan carmakers, said yesterday he was not too worried about the impact of the growing Volkswagen emissions scandal on the auto industry.

"There is doubt existing today," Ghosn acknowledged in an interview with Bloomberg TV, speaking after Volkswagen admitted that 11 million of its diesel cars worldwide are equipped with devices that can cheat air pollution tests.

But "I am not so worried about it," he said in the interview broadcast from the Frankfurt auto show.

"Every country has their own testing and emissions. We have to adapt in the most truthful and transparent way."

Ghosn, chief executive of Renault and Nissan, was questioned about the potential fallout from the Volkswagen crisis that was hitting shares of VW and other automakers in Europe and the United States.