Media Moves

Coverage: VW emissions scandal continues to grow

September 22, 2015

Posted by Meg Garner

After EPA launched an investigation last week into Volkswagen allegedly deceiving regulations about its diesel car emissions, the German automaker is not only apologizing for the scandal, but it also setting aside more than $7 million for potential fines.

And while it appears VW is taking the proper steps to slow the fallout that is not stopping other international investigations from popping up, with the South Korean government launching its own probe Tuesday.

Associated Press reporter Geir Moulson broke down the company’s apology:

In its statement Tuesday, Volkswagen gave more details, admitting that “discrepancies” related to vehicles with Type EA 189 engines and involved some 11 million vehicles worldwide.

“A noticeable deviation between bench test results and actual road use was established solely for this type of engine,” it said. “Volkswagen is working intensely to eliminate these deviations through technical measures.”

To cover the necessary service measures and what it says are “other efforts to win back the trust of our customers,” VW said is setting aside some 6.5 billion euros in the current quarter.

That figure, it conceded, may be subject to revaluation in the light of ongoing investigations. As a result, it said 2015 earnings targets will be adjusted but it didn’t specify by how much.

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.

CEO Martin Winterkorn issued an apology on Sunday for the U.S. scandal, promised an internal investigation and acknowledged that his company had “broken the trust of our customers and the public.”

Catherine Boyle of CNBC explained how this scandal impacts all of Germany:

Vorsprung durch Technik (advancing through technology) may have originally been an Audi slogan, but it came to epitomize much of what was believed about German manufacturing capability and reliability across its car industry, the cornerstone of Germany’s post-war economic miracle.

The Volkswagen scandal looks set to permanently damage that image. Small wonder that Germany’s politicians are calling for blood, with Lower Saxony’s Economy Minister Olaf Lies warning of “personnel consequences” already.

“The whole structure of the VW company looks a bit strange,” Ferdinand Dudenhöffer, professor at the Center for Automotive Research, Universität Duisburg-Essen, told CNBC, as he called for an outside appointment to solve the scandal.

There have even been calls for a special debate in the national parliament over the issue. The German state of Lower Saxony still owns around 20 percent of Volkswagen – a shareholding which has lost close to a fifth of its value since Monday morning.

The escalating scandal was big enough to drag the country’s entire stock market down on Monday, while stock markets elsewhere in Europe rebounded from a week of uncertainty surrounding the U.S. Federal Reserve’s decision on interest rates.

“We expect a widening scandal and an economic impact,” Wolfgang Munchau, president of Euro Intelligence, warned in a tweet Tuesday.

There are concerns that, much like the Libor scandal was initially publicized by Barclays but then found to include other top investment banks, the emissions tampering will not have been confined to Volkswagen. Other manufacturers with diesel as a large part of their business include BMW, with 35 percent of its fleet; Daimler, 45 percent; PSA Peugeot Citroën, 40 percent; and Renault Nissan, 25 percent, according to JP Morgan estimates. The European industry will be disproportionately hit if this is found to have been a problem across the diesel automakers.

Bloomberg News how concerns bout VW’s emissions are spreading to other countries, including a new investigation in South Korea:

The fallout from Volkswagen AG’s admission that it had cheated on emission tests in the U.S. is spreading to Asia, as South Korea said it will check whether the German automaker complied with its pollution standards.

South Korea will test emissions on diesel versions of VW’s Jetta, Golf, and Audi AG’s A3 sedan in October, Park Pan Kyu, deputy director of the country’s environment ministry, said by phone. The investigation will involve about 4,000 to 5,000 vehicles that were imported to Korea since 2014, Park said.

“We found it necessary to review the emissions of the models under probe in the U.S., although the U.S. has a more rigid emissions standard than Korea does,” Park said. “We have no plans at the moment to expand the investigation to other makers or models but will continue to closely monitor the situation.”

South Korea is reviewing Volkswagen’s compliance after the company admitted to systematically cheating on U.S. air pollution tests, while Germany said it may investigate the matter. Europe’s biggest carmaker derived about 40 percent of its volume sales last year from Asia, home to its largest market China.

William Boston and Sarah Sloat of The Wall Street Journal laid out how VW got to this point:

Last Friday, U.S. environmental authorities alleged Volkswagen had installed software in nearly 500,000 cars that made them appear to run cleaner in emissions tests than they do on the road. The company hasn’t contested the accusation, and Chief Executive Martin Winterkorn has since issued a personal apology.

The company is now subject to an EPA and U.S. criminal investigation and could face as much as $18 billion in fines.

The U.S. Justice Department’s Environment and Natural Resources Division has begun an investigation into the alleged cheating, people familiar with the matter said. The U.S. House oversight and investigations subcommittee on Monday said it planned to hold a hearing in coming weeks.

The U.S. scandal shocked Germany, where every seventh job is linked to the auto industry, and swept up rival car makers in its wake.

Investigations into Volkswagen’s alleged manipulation of U.S. emissions tests should widen to include the entire auto industry, German and French officials Tuesday, as regulators begin to ponder whether such trickery is more widespread.

Concerns that the scandal could lead to broader damage for the industry hit the shares of car companies across Europe, with shares of Daimler AG, BMW AG, and French car makers Renault SA and PSA Peugeot Citroën all suffering sharp falls.

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