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VW sets aside $7.3B war chest for diesel scandal fallout

The crisis enveloping Volkswagen AG, the world's top-selling carmaker, escalated Tuesday as the company issued a profit warning following a stunning admission that some 11 million of its diesel vehicles worldwide were fitted with software at the center of a US emissions scandal. The German company said it was setting aside around 6.5 billion euros ($7.3 billion) to cover the fallout from the scandal that has tarnished VW's reputation, raised questions over the future of CEO Martin Winterkorn and battered its share price. The reputational damage to Volkswagen is implicit in the market's response. Volkswagen's share price slid a further 16.2 percent Tuesday to a near four-year low of 112 euros. The fall comes on top of Monday's 17 percent decline. The shockwaves from the scandal enveloping Volkswagen were being felt far and wide across the sector as traders wondered who else may get embroiled. Germany's Daimler AG, the maker of Mercedes-Benz cars, was down 6.5 percent, while BMW AG fell 5.4 percent. France's Renault SA was seven percent lower. The scandal is hugely damaging to a business that relies heavily on a hard-won reputation for quality and trustworthiness. "Brands are all about trust and it takes years and years to develop. But in the space of 24 hours, Volkswagen has gone from one people could trust to one people don't know what to think of," said Nigel Currie, an independent UK-based sponsorship and branding consultant. The trigger to the company's market woes was last Friday's revelation from the US's Environmental Protection Agency that VW rigged nearly half a million cars to defeat US smog tests. The company then admitted that it intentionally installed software programmed to switch engines to a cleaner mode during official emissions testing. 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. "We have totally screwed up." - Michael Horn "In my German words: we have totally screwed up," the head of Volkswagen's US division, Michael Horn, told an audience in New York on Monday. In its statement Tuesday, Volkswagen gave more details, admitting that there were "discrepancies" related to vehicles with Type EA 189 engines and involving some 11 million vehicles worldwide. The number of vehicles involved is more than the 10 million or so cars it sold in 2014.

Audi A3 diesel fails independent emissions test in Europe

The best-selling model under Volkswagen's Audi division was emitted about double the legal limits of nitrogen oxide (NOx) levels for Europe, Reuters says, citing laboratory tests overseen by the European Commission's Joint Research Center (JRC) in August. The Audi A3 was found in two tests to emit about double the legal limit of NOx, though one of the tests had the A3 within the limits when the engine was cold. An Audi spokesman told Reuters that the A3 was independently tested to have emissions levels within the legal limit and that he wasn't aware of the JRC test results. Still, the findings are another example of how Volkswagen, Europe's largest automaker, can not seem to shed the issues surrounding the diesel-emissions scandal that broke last September. VW has been fined about $19 billion for equipping diesel cars with software that cheats emissions-testing systems. About 11 million cars were affected, including about a half-million vehicles in the US. In addition reaching a $15 billion settlement with US regulatory bodies such as the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) earlier this year, VW has been fined $15 million by the South Korean government, which may impose more penalties because of allegations of false advertising. Audi is not the only VW unit to face further scrutiny. Germany's Transport Ministry and Federal Motor Transport Authority are taking a closer look at VW's Porsche division for potential emissions-cheating efforts, Bloomberg News recently reported. Additionally, the European Union is saying that at least seven of its member nations failed to provide sufficient oversight of automobiles' emissions-testing process, and may take legal action against Germany, Spain, Luxembourg, Czech Republic, Lithuania, Greece, and Great Britain, according to a separate Reuters article. Related Video: Featured Gallery 2017 Audi A3 View 125 Photos News Source: Reuters via Automotive News Europe-sub.req. Government/Legal Green Audi Volkswagen AutoblogGreen Exclusive Emissions Diesel Vehicles testing

VW stock plummets as Euro markets open

The fallout from Volkswagen's installation of an emissions "defeat device" on nearly 500,000 diesel-fueled models in the US is already hitting the automaker hard on the German stock exchange. At one point, the share price plummeted 23 percent to erase the equivalent of $17.6 billion in value. Things eventually bounced back slightly to a still severe 19.23 percent loss, according to Bloomberg as of this writing. The scandal couldn't come at a worse time for chairman Martin Winterkorn. The VW supervisory board takes up the issue of renewing his contract on September 25, Bloomberg reports. If things get bad enough, the door could be open for a new boss to step in. Dealers in the US might start feeling the pain from this, as well. Affected 2015 VWs that are still at showrooms are now under a stop sale. Until the issue is straightened out, the Environmental Protection Agency isn't certifying the company's 2016 diesel models with the 2.0 TDI, either. The diesel emissions problem was first discovered by research from West Virginia University and the International Council on Clean Transportation. In some cases, the engines can produce 40 times more nitrogen oxides than allowed. The automaker could be on the hook for $18 billion in fines for the breach, but the actual figure is expected to be lower. In response, Winterkorn has issued a public apology and ordered an independent investigation into what happened. The EPA and California Air Resources Board have also been looking into the situation. This could become an international problem, though. According to The Detroit News, European authorities might begin similar inquires to check the automaker's diesel emissions there.