Auto maker also begins external probe after EPA accuses company of dodging emissions rules
 |
| diesel scandal |
It also launched an external investigation. Shares in the company slumped more than 20% in early trading Monday in response to the crisis.
The company could face billions of dollars in fines and the crisis could further weaken Volkswagen Chief Executive Martin Winterkorn’s position. He narrowly survived efforts by a major shareholder to oust him earlier this year and was passed over for the chairman’s job, the company’s top post, this month.
“I personally am deeply sorry that we have broken the trust of our customers and the public,” Mr. Winterkorn said in a statement issued by the company on Sunday, adding that VW is cooperating with authorities and has commissioned an external probe.
The U.S. is crucial in Volkswagen’s efforts to become the world’s leading auto maker by sales. 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. It is neck-and-neck with reigning sales leader Toyota Motor Corp. and overtook the Japanese car maker during the first half of this year. But the emissions test probes could stall its progress.
Even prior to the emissions issue, the auto maker’s namesake Volkswagen brand has been battling declining sales in the U.S. market. And Audi AG, its luxury car maker, is finding it hard to catch up in the U.S. with rivals BMW AG and Daimler AG, which makes Mercedes-Benz vehicles.
On Friday, the U.S. Environmental Protection Agency and the California Air Resources Board alleged that Volkswagen used software, dubbed a “defeat device,” in the cars to make diesel-powered engines appear to have lower levels of emissions than they actually did.
About 482,000 Volkswagen diesel-powered cars were affected.
The EPA probe could force Volkswagen and its Audi unit to recall thousands of vehicles that contain the company’s “clean diesel” engines. The four-cylinder 2.0-liter turbo direct injection, or TDI, engine is commonly found in Volkswagen’s Passat, Jetta, Golf, Beetle and in Audi’s A3 luxury compact model.
A Volkswagen spokesman on Sunday said the auto maker halted the sale of all 2015 and 2016 models containing the four-cylinder 2.0 liter TDI engine. The EPA investigation affects cars sold since 2008. The company hasn’t issued a recall, the spokesman said.
Realization that Volkswagen may have cheated to get better emissions results could undermine its U.S. recovery and further weaken its shares, which are down 37% from their peak on March 16, said analysts.
“There is no way to put an optimistic spin on this—this is really serious,” said Max Warburton, an analyst with Bernstein Research. “The best case for VW is probably still a multi-billion dollar fine.”
U.S. officials said Volkswagen violated two parts of the federal Clean Air Act and could face fines of as much as $37,500 per car, or more than $18 billion. It remained unclear whether the government would seek such an onerous penalty.
The EPA in November 2014 hit South Korean auto makers Hyundai Motor Co. and Kia Motors Corp. with a record $100 million penalty for overstating fuel-economy claims and forced the companies to cough up another $200 million in regulatory credits.
The EPA has said the vehicles remain safe and legal to drive. The agency is working with the Justice Department and an investigation is continuing.
Officials alleged that Volkswagen used software that activates full emissions controls only during testing but then reduces their effectiveness during normal driving. The result is that cars can emit nitrogen oxides at up to 40 times the allowable standard, the agency said. Diesel-powered cars are a small part of overall U.S. car and light-truck sales.
Experts say that the software enables cars to get better fuel economy at the expense of higher nitrogen-oxide emissions, which was likely one reason VW was using them, according to Margo Oge, who recently retired as director of the EPA’s Office of Transportation and Air Quality after more than 30 years at the agency.
Volkswagen’s apparent motivations on the emissions tests were unclear. An EPA spokeswoman has said it would be “premature to speculate on why VW did this.”
A Volkswagen spokesman in Wolfsburg, Germany, on Sunday said, “We are now in the investigation phase and have no comment beyond what is in the statement that we published today.”
California is separately investigating the auto maker.
The International Council on Clean Transportation, a nonprofit research organization that works with governments to cut air pollution from mobile sources, and West Virginia University researchers uncovered Volkswagen’s alleged use of defeat devices in research and testing over the last couple of years.