Frankfurt: Giant German automaker has suffered a severe blow on its credibility after it was evealed Tuesday that 11 million diesel cars worldwide are equipped with devices that can cheat pollution tests, a dramatic expansion of a scandal that immediately sent its shares plummeting by another 20 per cent.
Authorities from France to South Korea to the United States announced investigations and threatened legal action, prompting Volkswagen to announce that it was setting aside 6.5 billion euros ($7.3 billion) in provisions for the third quarter to cover the potential costs of the scandal.
VW shares, which dived 17 per cent on Monday, plunged by another 23 per cent to a low of 101.30 euros during trade on the Frankfurt stock exchange as the automaker’s new revelations, including a warning that it will have to lower its profit outlook, sent investors fleeing. The shockwave of the scandal has slashed VW’s market capitalisation by about 25 billion euros to 51 billion euros in just two days.
So far the scandal has been restricted to Volkswagen. But the EPA said Monday that it will screen for defeat devices in other manufacturers’ diesel vehicles now on the road, though it declined to identify the automakers whose vehicles will be tested.
Environment protection groups, particularly in Germany, suspect other car makers may be using similar technology. Industry experts say VW chief executive Martin Winterkorn’s job is on the line. German media reports have said the car maker’s supervisory board will meet on Wednesday and summon Winterkorn. VW was not immediately available to confirm the information.