Volkswagen CEO Shown the Door, Emission Cheat Probe Widens

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Photo Credit: Jeff Djevdet/speedpropertybuyers.co.uk/Flickr

The German media reported that Martin Winterkorn, the company’s CEO, was ousted from the post on Tuesday, even as  South Korea ordered a probe into the alleged deceptive tactics used by Volkswagen to fake emission tests  in that country. Friday is Winterkorn’s last day at Volkswagen, according to German press reports in Der Tagesspiegel.

The crisis at Volkswagen is deepening as the ambit of the scandal has now widened beyond the U.S. and Europe. Winterkorn, earlier on Monday, admitted that they “totally screwed up” and apologized in a message posted on its website. According to a Reuters report, Volkswagen board meeting on Friday is expected to take stock of the crisis the company is facing, and more heads could roll.

South Korean authorities have ordered a probe that will cover about 4,000 to 5,000 Jetta, Golf and Audi A3 vehicles produced in 2014 and 2015, and the probe could extend to all the  Volkswagen models. Meanwhile, Australian authorities have sought clarification from the company as to whether any cars sold in the island nation were installed with the similar emission cheating software that is under probe now in the U.S.

About 11 million Volkswagen diesel cars worldwide have the same software used to cheat emission tests in the U.S., the German automaker said in a statement, Tuesday, indicating that the number of cars affected is much more than what was previously disclosed, and damage from the scandal could weigh on the company’s reputation globally.

Volkswagen said it is working at “full speed” to rectify the irregularities through technical measures and alleviate concerns about a particular software used in Type EA 189 engines. The company earlier had said that about 5 million cars in the U.S. were installed with the software. Volkswagen said that the software works flawlessly in other types of diesel engines, and new vehicles available from the company in the European Union complies with the legal requirements and environment standards.

“Discrepancies relate to vehicles with Type EA 189 engines, involving some eleven million vehicles worldwide. A noticeable deviation between bench test results and actual road use was established solely for this type of engine,” the auto major said, adding, “Volkswagen is working intensely to eliminate these deviations through technical measures.”

According to the U.S. EPA officials, the software in affected diesel cars was programmed to sense when emission tests were being conducted and to turn on an equipment that reduced emissions. However, the equipment when switched on reduces the performance and fuel efficiency of the cars. Therefore, at other times, the software kept the equipment off and the cars performed better with fuel efficiency but emitted about 40 times the allowed quantity of a pollutant-nitrogen oxide.

The diesel engines with that particular software were installed in the Golf, Beetle, Jetta and Passat models sold in the U.S. The company has halted the sales of the cars with the particular engine in the U.S. after the EPA ordered a criminal probe into the allegations. If the alleged emission irregularities are proved, then the company  could face penalties up to $18 billion.

Volkswagen said that to win back the trust and goodwill of the customers, it will be setting aside a provision of 6.5 billion euros, which will be accounted in the third quarter, and companies guidance for 2015 will be revised to reflect this.

Volkswagen shares traded down 20% Tuesday and weighed heavily on stock markets around the world. On Monday, the company shares lost about 19% to reach a four-year-low in the European bourses.

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