Volkswagen CEO Martin Winterkorn Alexander Koerner, Getty Images

Martin Winterkorn has held the top spot at Volkswagen for the last eight years. But will he ultimately resign as CEO over his company's emissions scandal?

VW Shares Slide 20% After Emissions Scam

Volkswagen stock tumbles during the first business morning after news broke of its emission software scam. Now the questions include: How much will this affect the VW brand in the United States? And how much wider will the scandal spread?

FRANKFURT, Germany — Volkswagen shares plummeted more than 20% on Monday after news emerged that nearly half a million of its diesel cars in the United States had been fitted with software that falsified emissions data.

By late morning on the Frankfurt stock exchange, VW shares had fallen by more than 20% to 126.35 euros ($142.10), dragging down the entire market. 

The scandal, which came to light on Friday, could lead to financial fines of up to $18 billion for the carmaker as well as threatening the brand’s image in the United States and around the world. It is unknown how far the scandal might spread.

South Korea’s Yonhap news agency said the country will conduct emissions tests on three Volkswagen car models in mid-October to check for similar deception.

According to the U.S. authorities, VW equipped 482,000 cars in the United States with a sophisticated software that turns off emissions controls when driving normally and turns them on only when the car is undergoing an emissions test.  

Unknown to drivers, the software detects when the car is undergoing an emissions test and then activates an internal mechanism to limit the pollutant gases. This allows the car to pass the test, earning a certificate of good environmental performance. 

But once the test is over, the mechanism de-activates itself, releasing pollutant gases into the air, such as nitrogen oxides that are linked to severe respiratory ailments such as asthma. 

“Using a defeat device in cars to evade clean air standards is illegal and a threat to public health,” said Cynthia Giles, enforcement officer at the Environment Protection Agency (EPA), describing the allegations as “very serious matters.” 

‘Deeply Sorry’

In a statement on Sunday, VW said that the EPA and the California Air Resources Board (CARB) had found that while testing diesel cars of the Volkswagen group they had “detected manipulations that violate American environmental standards.”

VW CEO Martin Winterkorn issued an apology and said the group had ordered an external investigation into the matter.

“The board of management takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public,” Winterkorn said. “We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly and completely establish all of the facts of this case.

“We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire board of management.”

The deception was uncovered by the “dogged” perseverance of the non-governmental organization International Council on Clean Transportation, which alerted researchers at West Virginia University. After independent tests, the researchers uncovered anomalies between actual and reported gas emissions. 

The EPA ordered VW to recall the vehicles concerned — four-cylinder VW and Audi diesel cars built since 2008 — and “fix the cars’ emission systems.” 

Under the U.S. Clean Air Act, fines of up to $37,500 can be imposed on each car, meaning VW could be fined more than $18 billion. 

Dented Image

Stefan Bratzel at the Center for Automotive Management, said the damage to VW’s image would be just as big as the financial fines. Now questions would be asked whether the manipulation was going on, he said, “not just in the U.S., but in Europe, too. … VW wanted to establish diesel-powered cars in the U.S. market. That’s over now. This wreaks enormous damage on the brand.” 

Another leading German auto expert, Ferdinand Dudenhoeffer, agreed. ”It will be tough for VW to regain its credibility in the U.S. after this incident,” he said, suggesting it could cost Winterkorn his job, too. 

Winterkorn, 68, has been CEO since 2007. But he was involved earlier this year in an ugly leadership battle with then-supervisory board chief and VW patriarch Ferdinand Piech, who installed Winterkorn as CEO in 2007. 

Piech appeared to have become irked by his former protege’s difficulties in making substantial inroads into the U.S. market, as well as VW’s over-dependence on the Chinese market and the waning attractiveness of its core Volkswagen brand. 

At the end of a bitter and very public battle, 78-year-old Piech finally resigned in April. 

“I think VW needs a fresh start,” Dudenhoeffer said. 

By Simon Morgan

Copyright Agence France-Presse, 2015

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