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 Europe's biggest carmaker has said it may have installed software
that enabled it to cheat diesel emissions tests on up to 11 million
diesel vehicles worldwide.
Some analysts have said the scandal could cost the German company as
much as 35 billion euros ($40 billion) to cover vehicle refits,
regulatory fines and lawsuits.
Italian finance police raided the headquarters of Volkswagen's
Lamborghini sports car division on Thursday, an investigative source
said, as part of a criminal inquiry into alleged commercial fraud by
the parent company.
The scandal has wiped around a quarter off VW's stock market value,
forced out its long-time chief executive and sent shockwaves through
the global auto industry and the German establishment.
German Environment Minister Barbara Hendricks said on Thursday the
government should think about ending tax breaks for diesel cars and
promoting electric ones, though she later said higher taxes for
diesel vehicles were not on the agenda.
Tax breaks have given a big boost to diesel vehicles in Europe,
where they account for about a half of sales compared with just a
small fraction in the United States. Abolishing them could have
business implications for European carmakers including Renault <RENA.PA>,
Peugeot <PEUP.PA> and Fiat <FCHA.MI>, as well as Volkswagen.
France said on Wednesday it planned to reduce a tax break on diesel
fuel.
MANDATORY RECALL
German Transport Minister Alexander Dobrindt said the country's KBA
automotive watchdog had ordered Volkswagen to start a mandatory
recall of 2.4 million vehicles at the beginning of next year.
The Bild newspaper said the KBA had rejected the idea owners could
voluntarily bring in their vehicles.
The KBA has given Volkswagen until the end of the month to come up
with a plan for a software fix needed for 2.0 liter vehicles
affected by the recall, Dobrindt said.
The carmaker has until the end of November to come up with a
technical solution for 1.6 and 1.2 liter vehicles, he added.
Volkswagen has said it aims to complete a refit of vehicles affected
worldwide by the end of 2016, with some requiring more complex and
expensive changes to hardware.
Germany had previously said 2.8 million Volkswagen vehicles were
affected by the scandal in the country. Dobrindt said only 2.4
million needed to be recalled because the other 400,000 were no
longer on the roads. He reiterated the affected vehicles were safe
and could be driven as normal.
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Dobrindt said the German government still did not know who was
responsible for creating and installing the cheat software, or when
and how the decisions were made.
Nearly four weeks after it publicly admitted to rigging U.S. diesel
emissions tests, Volkswagen is under pressure to identify those
responsible and fix affected vehicles.
It has been criticized by politicians, investors and consumers for
the time it is taking to produce answers.
The KBA and other European national authorities are due to provide
an update to the European Commission in Brussels later on Thursday
on investigations of the emissions scandal in their respective
markets.
New Volkswagen Chief Executive Matthias Mueller is also expected to
speak to top management on Thursday about the current state of
investigations and its response to the crisis.
On Tuesday, Volkswagen said it would cut investment plans at its
core VW division by 1 billion euros ($1.1 billion) a year through
2019 and step up the development of electric and hybrid vehicles.
Company sources told Reuters on Wednesday the premium Audi division,
which generates about 40 percent of group profit, was also working
on plans to cut spending.
($1 = 0.8738 euros)
(Reporting by Jan Schwartz, Caroline Copley, Michael Nienaber and
Andreas Cremer; Writing by Maria Sheahan and Mark Potter; Editing by
Giles Elgood)
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