EU giant sets aside $7.3 billion to undo emissions scandal damage

The crisis enveloping Volkswagen AG, escalated on 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 centre of a US emissions scandal. In a statement, the German company said it was setting aside around 6.5 billion euros ($ 7.3 billion) to cover the fallout from the scandal that is tarnishing VW’s reputation for probity, raised questions over the future of its CEO Martin Winterkorn and seriously undermining its share price. 

In the wake of its statement, VW’s share price was down another 18.7 <g data-gr-id="20">per cent</g> at 108.75 euros and near a four-year low. The fall comes on top of yesterday’s hefty 17 per cent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading. 

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 <g data-gr-id="16">testing,</g> and apologized for it. 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. 

In its statement today, Volkswagen gave more details, admitting that “discrepancies” related to vehicles with Type EA 189 engines and involved some 11 million vehicles worldwide. “A noticeable deviation between bench test results and actual road use was established solely for this type of engine,” it said. “Volkswagen is working intensely to eliminate these deviations through technical measures.”