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 The German carmaker's shares fell to a new three-year low in early
trade, extending Monday's 19 percent plunge after it admitted to
using software that deceived U.S. regulators measuring toxic
emissions.
Europe's biggest automaker could face penalties of up to $18 billion
in the United States, as well as class-action lawsuits from buyers
and damage to its reputation, with U.S. regulators alleging it
misled them for more than a year.
VW, which for several years has been airing U.S. TV commercials
lauding its "clean diesel" cars, was challenged by authorities as
far back as 2014 over tests showing emissions exceeded California
state and U.S. federal limits.
VW attributed the excess emissions to "various technical issues" and
"unexpected" real-world conditions.
It wasn't until the Environmental Protection Agency and the
California Air Resources Board threatened to withhold certification
for the automaker's 2016 diesel models that VW in early September
revised its explanation.
A committee of Volkswagen's supervisory board is due to meet on
Wednesday to discuss the crisis. The full board is due to meet on
Friday to extend Chief Executive Martin Winterkorn's contract until
end-2018.
"I am sure that there will be personnel consequences in the end,
there is no question about it," supervisory board member Olaf Lies
told German radio station Deutschlandfunk on Tuesday.
Some analysts suggest Winterkorn, who recently saw off a challenge
to his leadership with the ousting of long-time chairman Ferdinand
Piech, will have to go.
Winterkorn oversees group R&D operations and ran the core Volkswagen
brand between 2007 and 2015, including the period when some of its
cars were found violating U.S. clean air rules.
"Winterkorn either knew of proceedings in the U.S. or it was not
reported to him," Evercore ISI analyst Arndt Ellinghorst said. "In
the first instance, he must step down immediately. In the second,
one needs to ask why such a far-reaching violation was not reported
to the top and then things will get tough too."
Analysts had been hoping Winterkorn's victory in his power struggle
with Piech would allow him to focus on tackling the carmaker's
long-running underperformance in North America as well as sharply
slowing demand in its main profit center, China.
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The U.S. Environmental Protection Agency (EPA) said on Monday it
would widen its investigation to other automakers. Media reports say
the U.S. Department of Justice has also started a criminal probe
into the allegations against Volkswagen, which cover VW and
Audi-branded diesel models including the Audi A3, VW Jetta, Beetle,
Golf and Passat.
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French Finance Minister Michel Sapin said on Tuesday a broad
European Union-level inquiry was needed too.
"It has to be done at a European level," he told Europe 1 radio. "We
are a European market with European rules. It is these that have to
be respected. It is these that have been violated in the United
States."
There have been no suggestions so far that other carmakers have
engaged in the same practices as Volkswagen. German rivals BMW and
Daimler have said the accusations against Volkswagen did not apply
to them.
The way carmakers test vehicles has been coming under growing
scrutiny from regulators worldwide amid complaints from
environmental groups that they use loopholes in the rules to
exaggerate fuel-saving and emissions results.
At 0845 GMT, Volkswagen shares were down 6.3 percent at 123.85 after
touching a low of 123.4 euros. The European auto sector index was
down 4 percent, as analysts speculated all carmakers could face more
stringent tests from regulators.
The South Korean probe into Volkswagen will involve 4,000 to 5,000
Jetta, Golf and Audi A3 vehicles produced in 2014 and 2015, Park
Pan-kyu, a deputy director at South Korea's environment ministry,
told Reuters.
The ministry will consider recalling those vehicles after conducting
the investigation, he said.
"If South Korean authorities find problems in the VW diesel cars,
the probe could be expanded to all German diesel cars," he added.
Volkswagen Korea declined to comment.
The Swiss Federal Roads Office said it was also investigating
whether the same type of Volkswagen diesel cars that were sold in
the United States were also sold in Switzerland, adding results were
due in days.
(Additional reporting by Sohee Kim in Seoul, Jeffrey Dastinm, Darren
Ormitz, Byron Kaye, Yann Le Guernigou and John Miller; Writing by
Will Waterman and Mark Potter; Editing by Sonya Hepinstall and Janet
McBride)
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