Volkswagen, which found itself at the epicenter of an emissions scandal last week, was further rocked today as shockwaves unleashed last week continued to smash through the world’s number one automaker. Last week, VW was ordered to recall 500,000 cars in the US because of emissions-cheating software.
The Environmental Protection Agency (EPA) told the automaker that 500,000 diesel cars had to be recalled because the vehicles were cheating on emissions. The agency had found that the cars, some made as long ago as 2009, had faulty emissions software installed. The software apparently looked at the diagnostic testing port and apparently if it sensed a diagnostic tester, it would automatically clean up dirty emissions. The emissions were dirty because the software relaxed its grip on emissions, when no testing was present, allowing the vehicle to perform more efficiently. That efficiency came at the expense of emissions. When the announcement came last week, it was noted that nitrogen dioxide emissions were 40 times allowable levels when running in regular mode.
Today, the crisis became worldwide for the automaker as it announced that as many as 11 million vehicles worldwide had the same engine hardware and emissions software installed. According to Bloomberg financial news, the automaker said it would be setting aside $6.5 billion (7.3 billion euros) in the third quarter to handle the issue. Further, the automaker indicated that the amount may have to change to accommodate further developments in the burgeoning scandal. In a statement, the automaker said rather laconically that its earnings targets “for 2015 will be adjusted accordingly.”
Volkswagen indicated the figure included, among other things, funding to regain “the trust of our customers.” The carmaker did not state, Bloomberg noted, whether any of the funds would go towards penalties. When the scandal broke at the end of last week, information, at the time, indicated the automaker could face $18 billion in total penalties, based on the 500,000 U.S. vehicles alone.
At issue are VW’s Type AE 189, four-cylinder diesel engines. The engines have shown significant deviation between testing and everyday emissions levels.
The vehicles in which the engines have been installed include:
- 2009-2015 VW Jetta
- 2009-2015 VW Golf
- 2009-2015 VW Rabbit
- 2009-2015 Audi A3
- 2014-2015 VW Passat
Meantime, the market continued to punish the automaker. At the market’s opening today, the stock was off as much as 20 percent as the scandal’s shockwaves spread. Yesterday, VW’s stock tanked 20 percent on weekend news of the scandal.
In other developments:
- The U.S. Justice Department has opened a probe into the emission scandal
- The German transport ministry has also begun an inquiry into the issue
- France, South Korea and Italy also announced probes