VW diesel scandal affects 11 million cars could attract $25 billion penalty

VOLKSWAGEN Australia has declined to comment on how its customers will be affected by a diesel emissions scandal that could cripple the world’s biggest car maker, Volkswagen Group.

The German company admitted last night that up to 11 million of its vehicles worldwide had been sold with diesel engines that ran much cleaner during official emissions testing than they did in ordinary driving.

A switch in the engine control software ensures the engines perform better and, reportedly, use less fuel in the hands of customers than they do in testing – while emitting up to 40 times the permitted level of nitrogen oxides, pollutants linked with respiratory problems.

The scandal came to light in the United States, where the Environmental Protection Agency said 482,000 four-cylinder diesel Volkswagens and Audis had been fitted with the switch software.

Cars involved included Volkswagen Golf, Jetta, Beetle and Audi A3 models built since 2009 and Volkswagen Passats since last year.

The US prescribes fines of up to $US 37,000 per car for breaches of its Clean Air Act, meaning Volkswagen could face $US 18 billion in penalties – $25 billion in Australian dollars.

The US EPA has ordered Volkswagen to recall all the affected vehicles and ensure that pollution levels in customers’ hands are as tested.

Volkswagen CEO Martin Winterkorn has apologised on video for what he described as manipulations detected by the EPA.

“I personally am deeply sorry that we have broken the trust of our customers and the public,” he said in a statement posted on VW’s European website.

“We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused.”

There was speculation that Winterkorn would be asked to resign at a board meeting tonight (Wednesday) Australian time. Update: VW chief Martin Winterkorn resigns.

The CEO of Volkswagen in the US, Michael Horn, has admitted the company had been dishonest, reports say.

“Our company was dishonest, with the EPA and the California Air Resources board, and with all of you and in my German words, we have totally screwed up,” he was quoted as saying yesterday at a launch for the Passat in New York.

Asked how the developments would affect Australian owners, a Volkswagen Australia spokesman said: “We’re awaiting guidance from head office. We can’t comment until then.”

He referred Wheels to a statement released overnight by Volkswagen Group, which said the company had set aside 6.4 billion euro (more than $A 10 billion) to “correct deviations” from test results that concerned only EA 189 turbodiesel engines fitted to 11 million vehicles worldwide.

Volkswagen was working intensely to eliminate the deviations through technical measures, it said.

Volkswagen share values have fallen 35 per cent as investors assess the cost to the company, reducing its market capitalisation by 25 billion euro ($A 39 billion).

Fellow German car importer Mercedes-Benz Australia, which offers a big range of models powered by its own diesels, said today it was 100 per cent confident its cars met Australian emissions standards.

Asked whether it would be taking a closer look at its range, a spokesman told Wheels: “No we aren't looking at our range at all. We're quite confident. But look, this isn't a matter that concerns Mercedes-Benz and we prefer not to comment on rival manufacturers.”

Porsche Australia spokesman Paul Ellis said no Porsche would be affected - even though Porsche is a member of Volkswagen Group.

“From what we understand at this moment, it doesn’t affect any Porsche vehicles anywhere in the world,” Ellis said.

Internationally, BMW, Toyota, Honda and Renault were reported as denying absolutely that their cars could be ensnared in the scandal.

"I can confirm that we don't use any software that could influence the emissions test," a BMW spokesman was quoted by London’s The Daily Telegraph.