As its CEO apologized for breaking its trust with its customers and the public, Volkswagen yesterday stopped selling cars in the U.S. with diesel motors that have a “defeat device” that enables them to pass emissions tests but spew nitrogen oxides at up to 40 times the standard under normal driving conditions.
CEO Martin Winterkorn was responding to charges made by the Environmental Protection Agency on Friday. The allegations cover roughly 482,000 diesel passenger cars sold in the United States since 2008, including the Jetta, Beetle, Audi A3 and Golf for model years 2009 to 2015 and the Passat for 2014 and 2015. (They are safe and legal to drive and resell, however, according to the EPA.)
“I personally am deeply sorry,” Winterkorn said in a statement that promised full cooperation with the responsible agencies “to clearly, openly, and completely establish all of the facts of this case” and revealing that VW has ordered an external investigation.
Meanwhile, the company lost almost a quarter of its market value in trading early Monday. “Shares plunged as much as 23% to 125.40 euros in Frankfurt, extending the stock’s slump for the year to 31%. The drop wiped out about 15.4 billion euros ($17.4 billion) in value,” report Richard Weiss and Naomi Kresge for Bloomberg.
Volkswagen is “potentially facing billions of dollars in fines and warranty costs, possible criminal charges for executives and class-action lawsuits from U.S. drivers,” Andy Sharman reports for Financial Times.
“The best case for VW is probably still a multibillion-dollar fine, pariah status in the U.S. with government — and possibly consumers — [and] damage to its leading position in diesel in the U.S.,” Bernstein Research analyst Max Warburton tells Sharman.
“For Volkswagen, it’s a huge scandal,” Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, tells the New York Times’ Jack Ewing and Coral Davenport. “Dudenhöffer said the case could damage all German automakers, which have tried to build acceptance in the United States for diesel engines, a sector in which they believe they have a technological lead,” they write.
A transparent approach to the crisis is key, Stefan Bratzel, a professor specializing in innovation research at the Bergisch Gladbach University of Applied Sciences, tells Deutsche Welle’s Janelle Dumalaon.
“This is obviously negative for the German car industry, but speculation has to be kept in check. Volkswagen and — if it comes to it — other German carmakers have to be proactive and transparent and say whether this was an isolated problem in the U.S., or whether this is a pattern,” Bratzel said.
“The U.S. is crucial in Volkswagen’s efforts to become the world’s leading automaker by sales,” point out William Boston, Amy Harder and Mike Spector for the Wall Street Journal. “The German company has built its campaign to grow in the U.S. market on a promise that its clean-diesel engines deliver better performance and low emissions.” Right now, it is “neck-and-neck with reigning sales leader Toyota.”
The already-beleagured Winterknorn, who in April came out the victor in a power struggle with his former mentor, ex-chairman Ferdinand Piëch, faces a supervisory board vote Friday on his contract. “This latest saga may help catalyze further management changes at VW,” Arndt Ellinghorst, a London-based analyst for Evercore ISI, wrote in a note Monday, Bloomberg’s Weiss and Kresge report.
The law firm Hagens Berman, with offices in 10 cities in the U.S., already has filed a class-action lawsuit against VW in U.S. District Court for the Northern District of California on behalf of people who bought the cars.
“Consumers we’ve heard from have gone to great lengths to find vehicles that they believed to be less polluting than other options, only to find out that the automaker cheated emissions tests,” said Steve Berman, managing partner of Hagens Berman, in a statement. “When Volkswagen decided to write and use software to fool regulators, it showed its true colors and blindsided millions of consumers who had placed their trust in VW.”
In an editorial Saturday stating that “Americans should be outraged at the company's cynical and deliberate efforts to violate one of this country's most important environmental laws” if the charges prove true, the Los Angeles Times also summed up how “the cheating came to light”:
“The California Air Resources Board and the EPA pressed Volkswagen for an explanation for disparities found between lab tests and road tests of its vehicle emissions. The agencies didn't find the technical reasons offered by VW to be convincing and said they would not issue certificates allowing 2016 models to be sold until the automaker offered an adequate explanation.”
Sometimes, there are no words.