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VW admits 11 million cars have cheating device

The auto manufacturer has announced that it is setting aside 6.5 billion euros in the third quarter of this year to cover the potential costs of the scandal.

Syndicated News
Written by Syndicated News
FRANKFURT — September 22, 2015: German auto giant Volkswagen revealed today that 11 million diesel cars worldwide are equipped with devices that can cheat pollution tests, a dramatic expansion of a scandal that immediately sent its shares plummeting by another 20 per cent.

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 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 23 per cent to a low of 101.30 euros during trade on the stock exchange here as the automaker’s new revelations, including a warning that it will have to lower its profit outlook, sent investors fleeing.

“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,” the car manufacturer added.

“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 spiralling 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 scandal went public 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 German firm halted all diesel vehicle sales in the United States during the US investigation, which could lead to fines of more than $18 billion.

The shockwave immediately hit stock markets, with VW shedding more than a quarter of their value — or more than 20 billion euros —  since last week.

Other automobile stocks were also dragged lower with Daimler shares down 7.03 per cent and BMW shedding 7.17 per cent today.

‘Europe-wide probe?’

French Finance Minister Michel Sapin today requested a Europe-wide probe, telling French radio that it seemed necessary to check cars manufactured by other European car makers in order to reassure the public.

“This is not a minor subject, it’s not about speed or the quality of leather,” Sapin told Europe 1 radio station.

“What we are dealing with is making sure people avoid being poisoned by pollution,” the minister said.

South Korean officials summoned VW representatives for explanations today. “We will start conducting tests no later than next month,” said a senior official at the environment ministry.

In addition to the environmental probe already under way, the US Department of Justice has launched a criminal investigation, US officials told the Bloomberg news agency. The Justice Department and Volkswagen declined to comment on the report.

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.

With the so-called “defeat device” deactivated, the car can spew pollutant gases into the air, including nitrogen oxide in amounts as much as 40 times higher than emissions standards, said the US Environmental Protection Agency, which announced the allegations Friday along with California authorities. — AFP

 

 

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