Volkswagen budgets $7.3bn to confront scandal

Volkswagen said a scandal over falsified U.S. vehicle emission tests could affect 11 million of its cars around the globe as investigations of its diesel models multiplied, heaping fresh pressure on CEO Martin Winterkorn.
The world’s largest automaker said it would set aside 6.5 billion euros ($7.3 billion) 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.
It also warned that amount could rise, saying diesel cars with so-called Type EA 189 engines built into Volkswagen models worldwide had shown a “noticeable deviation” in emission levels between testing and road use.
The U.S. Environmental Protection Agency (EPA) said on Friday Volkswagen could face penalties of up to $18 billion for cheating emissions tests. In addition, the U.S. Justice Department has launched a criminal probe, a source familiar with the matter said.
The investigation is likely to examine not only possible violations of the Clean Air Act but also of broader statutes against wire fraud, false statements to regulators and other crimes, former prosecutors not involved with the investigation said. A Justice Department spokesman declined to comment.
New York and other state attorneys general are also forming a group to investigate, New York Attorney General Eric Schneiderman said.

Read also: Volkswagen to probe US recall order

“No company should be allowed to evade our environmental laws or promise consumers a fake bill of goods,” Schneiderman said in a statement.
The crisis has sent shockwaves through Germany, with Chancellor Angela Merkel calling for “complete transparency” from a company seen as a symbol of the country’s engineering excellence.
Winterkorn was due to have his contract extended at a supervisory board meeting on Friday but is now facing questions about whether he knew about the use of software that deceived U.S. regulators measuring toxic emissions in some of its diesel cars.
“Winterkorn either knew of proceedings in the U.S. or it was not reported to him,” Evercore ISI analyst Arndt Ellinghorst said. “In the first instance, he must step down immediately. In the second, one needs to ask why such a far-reaching violation was not reported to the top, and then things will get tough, too.”
Volkswagen’s executive committee plans to meet on Wednesday to discuss the emissions test scandal and the agenda of a full board meeting long scheduled for Friday, sources familiar with the plans said.
Credit: Reuters

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