VW sets aside $7.3bn as diesel emissions probe widens

European automaker could face fines of up to $18bn in the US alone.
Volkswagen AG plans to set aside 6.5 billion euros ($7.3 billion) in the third quarter to cover the costs of addressing irregularities in diesel engines installed in 11 million vehicles worldwide, as the scandal that started in the US widens.

“Volkswagen is working at full speed to clarify irregularities concerning a particular software used in diesel engines,” the Wolfsburg, Germany-based company said in statement. The manufacturer said it will adjust its earnings forecasts for 2015 accordingly. VW shares plunged for a second day after the announcement.

Germany, France, South Korea and Italy were among countries on Tuesday that said they would look further into revelations that VW rigged diesel vehicles to pass emissions tests in the US That comes as the US Justice Department begins its own probe into the matter, according to two US officials familiar with the inquiry.

The scandal has grown since the US Environmental Protection Agency revealed on Friday that VW had cheated on the lab tests, exposing the company to as much as $18 billion in fines. The unfolding scandal brought an apology Monday from VW’s top U.S. executive, who vowed to win back the trust of consumers.

“Our company was dishonest with the EPA, and the California Air Resources Board and with all of you,” Michael Horn, the head of the VW brand in the US, said Monday in Brooklyn, New York, where he was revealing a redesigned version of the Passat sedan. “We have totally screwed up. We must fix the cars to prevent this from ever happening again and we have to make this right. This kind of behavior is totally inconsistent with our qualities.”

Stock plunge

The shares plummeted as much as 20% on Tuesday, after declining 19% on Monday. The stock has dropped 41% this year.

German Transportation Minister Alexander Dobrindt told the Bild newspaper in an interview published Tuesday that he has ordered emissions checks of VW diesel models in Germany. Italy’s Environment Ministry asked VW for assurances it has respected emission rules for its cars sold in Italy. South Korea said it will check whether the German automaker complied with its pollution standards.

French Finance Minister Michel Sapin called for a Europe- wide probe into carmarkers, including French ones, in the wake of the revelations.

“It’s seems necessary,” Sapin told Europe 1 radio. “We have to do it at a European level because the market is European with European rules.”

The executive committee of the carmaker’s supervisory board meets Wednesday to discuss the crisis, said people familiar with the matter.

©2015 Bloomberg News

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