Analysis: Deception fuels Volkswagen emissions scandal

22 Sep 2015 | Author: | No comments yet »

11 million cars are affected by the Volkswagen emissions scandal.

The chief executive of Volkswagen America, Michael Horn, has candidly apologised and admitted wrongdoing after the German car giant was caught cheating in US pollution measuring tests. “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, according to video posted by CNBC. Volkswagen says that an internal investigation has revealed that 11 million of its vehicles sold worldwide are fitted with the same software designed to trick emissions testing equipment as the 500,000 vehicles involved in an emerging scandal in the United States.

South Korea has said that the country would investigate emission levels of Volkswagen diesel vehicles following the automaker’s confession that it cheated US tests. According to ABC News, a deputy director at South Korea’s environment ministry Park Pan-kyu said that four models, Golf, Jetta, Beetle and Audi A3 are subject to the investigation that is expected to end in November. Authorities from France, South Korea and the United States announced investigations and threatened legal action, prompting VW to disclose that it was setting aside 6.5 billion euros ($A10.23 billion) in provisions for the third quarter to cover the potential costs of the scandal. Volkswagen AG admits that it rigged U.S. tests so it would appear that its diesel-powered cars were emitting fewer nitrogen oxides, which can contribute to ozone buildup and respiratory illness.

The scandal went public on Friday when US regulators ordered Volkswagen, the world’s largest automaker by sales, to fix the defect and said they were launching a probe. The fall comes on top of Monday’s hefty 17 percent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading.

The trigger to the company’s market woes was last Friday’s revelation from the U.S.’s Environmental Protection Agency that VW rigged nearly half a million cars to defeat U.S. smog tests. France’s finance minister Michel Sapin called for a “Europe-wide” probe, telling French radio it seemed “necessary” to check cars manufactured by other European carmakers in order to reassure the public. While VW’s statement Tuesday does not mention any fines or penalties, the company faces a maximum of $18 billion in fines in the U.S., though its losses resulting from this scandal could be even bigger. In addition to the environmental probe already underway, the US Department of Justice has launched a criminal investigation, US officials told Bloomberg. The software then switches off again, enabling cars to drive more powerfully on the road while emitting as much as 40 times the legal pollution limit.

Lies, who is also the economy minister of the German state of Lower Saxony, which holds a 20% stake in Volkswagen, said he was sure there would be “personal consequences” once the investigation is complete. In Germany, the government has already launched an investigation into whether Volkswagen or other car makers are doing anything similar in Germany or Europe. It added that the software is also installed in other vehicles with diesel engines but that that for the “majority of these engines the software does not have any effect.” Volkswagen said that new vehicles with EU 6 diesel engines currently on sale in the European Union comply with legal requirements and environmental standards.

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