Volkswagen In Trouble After EPA Discovers Rigged Emissions Numbers

September 21st 2015

Alex Mierjeski

Volkswagon is facing a public relations crisis and massive fines after the results of a U.S. Environmental Protection Agency probe last week found that the German automaker rigged emissions controls in hundreds of thousands of its diesel cars in order to meet U.S. emissions regulations.

"I personally am deeply sorry that we have broken the trust of our customers and the public," Volkswagen CEO Martin Winterkorn wrote in an apology over the weekend. "We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case," he said, adding that an external investigation had been ordered.

As a result of the investigation, the company's stock fell more than 23 percent, or about $17.4 billion in value Monday morning, Bloomberg reported. Sales of all the models involved were halted over the weekend, and early estimates indicate the company, whose diesel cars were an important driver of their U.S. market, could face as much as $18 billion in fines, as well as possible criminal prosecution for the violations.

Volkswagen's stock dropped more than 20 percent Monday

The company is just beginning to feel the effects of the revelation that between 2009 to 2015 nearly half a million diesel Volkswagen cars in the U.S., including Jettas, Beetles, Golfs, and some Audis (which VW manufactures) used a "defeat device" that would emit less pollutants when the software detected the car was undergoing an emissions test, but would turn off during normal driving. The investigation, conducted by the EPA and the California Air Resources Board, concluded that the devices allowed the cars to "emit up to 40 times more pollution" than what is allowed under emission standards contained in the Clean Air Act, NPR reported.

The New York Times reports that as a cornerstone of its U.S. presence, VW's diesel engines were marketed not only as fuel efficient, but "as comparable in performance to gasoline engines."

The company was apparently concerned that meeting federal standards would undercut their cars' performance. According to the Times, Volkswagen's admission came only after EPA officials threatened to withhold approval for the company's 2016 models, but the deception of the EPA had been denied for nearly a year.

It is unclear just what the punishment will be, but the company can expect to pay out hefty fines, face down a substantial public relations gaffe, and endure increased speculation in other countries around the world, where its diesel engines are much more popular. NPR notes that the U.S. government paid out $1,300 federal tax credits for buyers of the company's "clean diesel" turbo diesel (TDI) models of Jettas in 2009. Volkswagen Group's U.S. market accounts for about six percent of global sales, and as The Times reports, VW cars are not even the most profitable, overshadowed by brands the company owns such as Porsche and Audi.