VW chief under fire as scandal grows

It said it would set aside €6.5bn in its third-quarter accounts to help cover the costs of the biggest scandal in its 78-year-history, blowing a hole in analysts’ profit forecasts.

Photo: Reuters
Photo: Reuters

It also warned that amount could rise, saying diesel cars with so-called Type EA 189 engines built into about 11-million Volkswagen models worldwide had shown a “noticeable deviation” in emissions levels between testing and road use. VW sold 10.1-million cars last year.

The Tagesspiegel newspaper, citing unidentified sources on VW’s supervisory board, said the board would decide on Friday whether it would replace 68-year-old Mr Winterkorn with Matthias Mueller, the head of Porsche.

A VW spokesman denied the report. Mr Winterkorn did not mention his future in a video message posted on the company’s website in which he repeated his apology for the scandal.

But a key Winterkorn ally withheld public support for the CEO.

“I don’t want to preempt the upcoming intense deliberations and will not comment on details or any consequences,” Stephan Weil, head of the German state of Lower Saxony, said when asked about Mr Winterkorn’s future.

Shares in the world’s biggest car maker plunged almost 20% on Monday after it admitted using software that deceived US regulators measuring toxic emissions in some of its diesel cars.

The stock tumbled another 20% to a four-year low on Tuesday after some countries in Europe and Asia said they would launch investigations themselves.

At the lowest point, the declines in the preference and ordinary shares wiped more than $30bn off the company’s market value.

The US Environmental Protection Agency said on Friday that VW could face penalties of up to $18bn for cheating emissions tests.

The car maker also faces claims and damage to its reputation that could hit sales, and media reports have said the US Department of Justice has opened a criminal inquiry into the matter.

In addition, New York and other state attorneys-general are forming a group to probe the scandal, a spokesman for New York attorney-general Eric Schneiderman said. The probe would focus on potential violations of environmental and consumer fraud laws, the spokesman said.

The crisis has sent shock waves through Germany, with Chancellor Angela Merkel calling for “complete transparency” from a company long seen as a symbol of the country’s engineering excellence.

VW was challenged by authorities as far back as last year over tests showing emissions exceeded California state and US federal limits. The company attributed the excess emissions to “various technical issues” and “unexpected” real-world conditions.

It was not until the Environmental Protection Agency and the California air resources board, earlier this month, threatened to withhold certification for its 2016 diesel models that VW admitted its wrongdoing.

“Winterkorn either knew of proceedings in the US or it was not reported to him,” Evercore analyst Arndt Ellinghorst said.

On Monday, VW’s US chief Michael Horn said the company had “totally screwed up” and promised to make amends.

There have been no suggestions so far that other car makers have engaged in the same practices as Volkswagen. Germany’s BMW and Daimler have said the accusations against VW did not apply to them. But shares in those companies as well as rivals including Peugeot, Renault and Fiat Chrysler fell on Tuesday amid signs regulators across the world will step up scrutiny of vehicle tests, which environmentalists have long criticised for exaggerating fuel-saving and emissions results.

The Environmental Protection Agency said on Monday it would widen its investigation to other car makers, and French Finance Minister Michel Sapin said on Tuesday an EU-wide inquiry was needed too.

Germany’s transport ministry said it would send an investigative commission to study whether cars built at VW’s headquarters complied with German and European emissions guidelines. Italy asked VW to prove the cars sold in that country did not contain the “defeat devices” at the centre of the scandal, while Switzerland also said it would investigate VW’s diesel vehicle emissions tests.

The European Commission said it was premature to say whether specific checks on VW’s vehicles were needed.