Daily Management Review

Volkswagen Shares Plunge Worst Ever on Emission Scandal, Germany to Investigate its Europe Emission Data


Riddled with allegations of rigging the U.S. emissions tests and after Germany too announcing investigations into whether the company had tampered with data in Europe too, the German car maker Volkswagen saw its worst day ever at the stock market with the company shares falling more than 20 percent on Monday.

Software for diesel VW and Audi branded cars of Europe's biggest carmaker were installed to deceived regulators measuring toxic emissions and could face penalties of up to $18 billion, the U.S. Environmental Protection Agency (EPA) said on Friday.

Expressing concern over the impact of what he called "a bad case" on the country's vital auto industry, Germany's Economy Minister Sigmar Gabriel urged Volkswagen to fully clear up the allegations.

"You will understand that we are worried that the justifiably excellent reputation of the German car industry and in particular that of Volkswagen suffers," Gabriel said.

Quoting government sources news agency Reuters said that Germany's transport minister were due to discuss the matter with Volkswagen Chief Executive Martin Winterkorn on Monday.

The German government had earlier announced that it would conduct checks on whether emissions data had been manipulated in Germany and in Europe too.

While there are rumours that Winterkorn would now have to resign, the Volkswagen chief executive, on Sunday, said he was "deeply sorry" for the breach of U.S. rules and ordered an external investigation.

"This disaster is beyond all expectations," said Ferdinand Dudenhoeffer, head of the Center of Automotive Research at the University of Duisburg-Essen.

The market experts were however not clear about whether other automakers had also broken rules or what the ultimate cost could be for VW.

The German rivals of Volkswagen, Daimler and BMW made it clear that the allegations made by U.S. authorities against VW did not apply to them.

There are expectations among industry experts that Volkswagen will have to suffer from consequences apart from the financial penalty alone. After a bitter leadership battle within the company just over and the company board slated to sit for a meeting to discuss the restructuring of the company, the allegations by the EPA would have a serious impact on the immediate future plans of the management of Volkswagen.

Allegations about the increased toxic emissions against Volkswagen had first cropped up in 2014 after which the Californian Air Resources Board (CARB) initiated an investigation against the German car maker.

In July this year, CARB has informed Volkswagen that its tests had been continuously showing excessive nitrous emissions and the leading global car manufacturer conceded that it had used the "defeat device" to bypass control rules on September 3.

Amidst complaints from environmental groups that they use loopholes in the rules to exaggerate fuel-saving and emissions results, there has of late been intense criticism of the way car makers test vehicles.

Volkswagen had become the largest car seller of the world this year after toppling Toyota but has been facing pressures from a slowdown in China.