Volkswagen CEO – Martin Winterkorn – said the scandal involving the company diminishes the trust of the customers. The consequences are serious, because the German automaker risk the highest fine in the history of the automotive industry: 16 billion USD.
The scandal involving the Volkswagen Group in the United States is growing. US government authorities have accused the German conglomerate that cheated the consumption and emission tests conducted by EPA (United States Environmental Protection Agency) intentionally.
Only a few days after the accusations, Volkswagen made the first declarations and promises to cooperate with the investigative bodies. According to EPA, the Germans have admitted they installed a software in order to fool the EPA testing standards. VAG Group has implemented complex software programs created specifically to manipulate the EPA tests.
The consequences are much more serious than that, because Volkswagen has violated the Clean Air Act law knowingly . It sets a legal limit for nitrogen oxide emissions, but for the Volkswagen cars tested – the values recorded could exceed even 40 times the limit. The flagrant overcoming of these rules has a direct impact on the environment.
Experts claim that the high level of nitrogen oxides emissions was a direct result of the lower consumption induced by the installed software.
VW CEO: “I am saddened that we have deceived public confidence“
Cynthia Gilles, appointed administrator of EPA has made a series of new statements that come to cast a dark stain on the reputation of Volkswagen. “These are very serious irregularities, not only because they have found ways to defraud, but also because Volkswagen has deliberately concealed these values against the EPA and its clients in US. We’ve expected more from Volkswagen,” concluded Cynthia Gilles disappointed that failed to provide a public reason for the act committed by Volkswagen. The Germans did not want to comment on the motivation.
As expected, the scandal has cast a flurry of questions towards VAG. Therefore, Volkswagen came into the limelight with a press release and an official statement by Martin Winterkorn, Volkswagen CEO.
Winterkorn expressed regret and promised to work with EPA to complete the investigation. “I personally am extremely sorry that I ruined confidence of our customers and the general public.”
The official continued on the vigilante speech tone: “We do not tolerate and will not tolerate violations of our internal regulations and laws. Therefore, we will cooperate 100% with EPA in the investigation and, in turn, will hold an internal investigation to determine the culprits,”concluded Winterkorn.
500,000 Volkswagen cars are in question
The attitude of EPA was quite firm. They demanded the recall of cars equipped with software service fooled emission tests. It’s about 482,000 cars: VW Jetta, Beetle and Golf products between 2009 and 2015, 2014 and 2015 Passat and Audi A3 copies produced between 2009 and 2015.
All recalled to service cars were equipped with the 2.0 TDI four-cylinder engine capable of delivering 150 horsepower. Ironically this engine was promoted by the Germans labeled “Clean diesel”. It is still unclear whether a recall to remove the software‘s service will be extended to cars sold in the European market. The fact is that Volkswagen stopped momentarily affected US trade patterns and could have big problems with the introduction of other diesel versions on the US automarket.
Vokswagen could face the largest fine in the automobile history
The scandal would have serious financial implications for the Volkswagen Group. In the past, Kia and Hyundai were fined 300 million USD for official figures skewing consumer market throughout the United States. Given the seriousness of the offense, the Volkswagen Group could receive a fine even bigger.
Sources in the EPA claim that Volkswagen could be fined up to 37,500 EUR for each car with problems. That would result in the largest fine in the history of the auto industry: some 18 billion US dollars. To understand what this amount to the second-largest automotive group in the world (after the production figures recorded in 2014), we make a brief reference in the past when VAG announced an investment of 20 billion euros by 2020 to research and development of new technologies across the whole group.
In 2014, Volkswagen Group’s sales brought in treasury 202.5 billion EUR, 2.8% more than in 2013. However, operating profit was 12.7 billion EUR. Also, liquidity for Automotive Division had reached 16.9 billion EUR at the end of the fiscal year. Therefore, if the fine is confirmed, Volkswagen might wake up in the middle of a huge financial problem.
The company’s shares dropped dramatically
Serious financial consequences do not stop there. The scandal erupted at the end of last week brought a development nightmare VAG actions, with the opening exchange. They decreased first by 18% and reached 23% smaller then, and recorded as an impairment of the brand around 15.4 billion euros. The effects could have far-reaching consequences, actions Since we could drop as US sanctions will become increasingly severe.
Moreover, the dramatic fall in the value of shares could have consequences for the executive committee. An analyst from the Commerzbank AG, claims that a fraud verdict could attract the replacing of the Volkswagen management.