Volkswagen stock dives after emissions scandal

Volkswagen’s CEO Martin Winterkorn has been ousted.

The reputational damage to Volkswagen is implicit in the market’s response. The fall comes on top of Monday’s hefty 17 percent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading.

The shockwaves from the scandal enveloping Volkswagen were being felt far and wide across the sector as traders wondered who else may get embroiled. France’s Renault SA was 5.5 percent lower.

“Brands are all about trust and it takes years and years to develop. For the sake of our consumers and the environment, we need certainty that industry scrupulously respects emissions limits”, she said.

The U.S. Environmental Protection Agency could fine the company $37,500 per vehicle.

The company fitted its U.S. diesel cars with software that activates the pollution controls only when the vehicle is undergoing official emissions testing. When a driver is on the road, clean air and emission controls are “greatly reduced”, resulting in nitrogen oxide levels emitting at up to “40 times” the required level. “In my German words, we totally screwed up”. A noticeable deviation between bench test results and actual road use was established exclusively for this type of engine.

Volkswagen initially denied it was trying to game the inspections, attributing the higher emissions readings to “various technical issues and unexpected in-use conditions”, the EPA said on Friday.

“To cover the necessary service measures and other efforts to win back the trust of our customers, Volkswagen plans to set aside a provision of some 6.5 billion Euro recognized in the profit and loss statement in the third quarter of the current fiscal year”, the company says in its release. There was no mention of any fines or penalties.

German rivals Daimler and BMW said the accusations made by US authorities against VW did not apply to them.

It is unclear what will be the ultimate cost of the scandal to VW, which also faces a class-action lawsuit from buyers, but sales of affected versions of the relevant models have already been suspended in the USA and Canada. It gave no information on its content. It didn’t specify by how much.

Meanwhile, if other regulatory authorities decide VW has a case to answer, then the carmaker faces the potential for even bigger fines. “But I have no particular reason to think that French manufacturers behaved themselves like Volkswagen”.

Winterkorn said on Sunday he was “deeply sorry” for the breach of USA rules and ordered an external investigation. Earlier, the government said it would conduct checks on whether emissions data had been manipulated in Germany and in Europe too. German Chancellor Angela Merkel also called on Volkswagen to be transparent and act quickly to address worldwide regulators’ concerns.

Before the scandal, Winterkorn, CEO since 2007, was hoping to have his stewardship of the company extended at a board meeting Friday.

German media reports have said the VW’s supervisory board will meet on Wednesday and summon Winterkorn.

Volkswagen stunned investors Tuesday by admitting that the problem was much bigger than that: internal investigations had found significant discrepancies in 11 million vehicles worldwide.