Toronto/Berlin (CP)— Volkswagen Canada has told dealers to stop selling diesel-powered vehicles involved in an emissions-testing scandal that has drawn the ire of American regulators.
Spokesman Thomas Tetzlaff said in an email that the Canadian division of the automaker is working with its American counterpart and parent company in Germany to resolve the issue.
Volkswagen CEO Martin Winterkorn apologized on Sunday following revelations last week that the company had rigged U.S. emissions tests for about 500,000 diesel cars.
Tetzlaff said nearly all of the company’s Volkswagen-branded diesel cars are included in the stop sale order in Canada, including the Jetta, the Golf, and the Beetle.
No mention was made of what is to happen with cars already on the road.
The U.S. Environmental Protection Agency said Friday that Volkswagen had programmed the computers in its vehicles to recognize emissions testing and turn on extra pollution controls that are not engaged during regular driving.
The crisis enveloping Volkswagen AG, the world’s top-selling carmaker, escalated Tuesday as the company issued a profit warning following a stunning admission that some 11 million of its diesel vehicles worldwide were fitted with software at the centre of a U.S. emissions scandal.
In a statement, the German company said it was setting aside around 6.5 billion euros ($7.3 billion) to cover the fallout from the scandal that is tarnishing VW’s reputation for probity and seriously undermining its share price. There was no mention of any fines or penalties.
In the wake of its statement, VW’s share price was down another 17.6 per cent at 110.20 euros and near a four-year low. The fall comes on top of Monday’s hefty 17 per cent decline and means the company has lost an eye-watering 25 billion euros or so in just two days of frenzied trading.
The trigger to the company’s market woes was last Friday’s revelation from the U.S.’s Environmental Protection Agency that VW rigged nearly half a million cars to defeat U.S. smog tests.
The company then admitted that it intentionally installed software programmed to switch engines to a cleaner mode during official emissions testing. The software then switches off again, enabling cars to drive more powerfully on the road while emitting as much as 40 times the legal pollution limit.
In its statement Tuesday, Volkswagen gave more details, admitting that “discrepancies” related to vehicles with Type EA 189 engines and involved some 11 million vehicles worldwide.
“A noticeable deviation between bench test results and actual road use was established solely for this type of engine,” it said. “Volkswagen is working intensely to eliminate these deviations through technical measures.”
To cover the necessary service measures and what it says are “other efforts to win back the trust of our customers,” VW said is setting aside some 6.5 billion euros in the current quarter.
That figure, it conceded, may be subject to revaluation in the light of ongoing investigations. As a result, it said 2015 earnings targets will be adjusted but it didn’t specify by how much.
It added that the software is also installed in other vehicles with diesel engines but that that for the “majority of these engines the software does not have any effect.”
Volkswagen said that new vehicles with EU 6 diesel engines currently on sale in the European Union comply with legal requirements and environmental standards.
CEO Martin Winterkorn issued an apology on Sunday for the U.S. scandal, promised an internal investigation and acknowledged that his company had “broken the trust of our customers and the public.”
VW’s troubles already are not confined to the U.S., though.
South Korea said Tuesday it would investigate emission levels of Volkswagen diesel vehicles in the wake of the rigging scandal in the U.S. that has heaped pressure on Winterkorn. The German government is to also conduct new emissions tests in VW’s diesel cars, while France called for a wider Europe-wide investigation into Volkswagen’s practices – and into those of French carmakers.
Even before Tuesday’s statement, a member of Volkswagen’s supervisory board suggested that heads will roll in the wake of the scandal, though he said it was too soon to start assigning blame.
Speaking on Germany’s Deutschlandfunk radio, Olaf Lies cautioned against “over-hasty calls for resignations.”
Lies, who is also the economy minister of the German state of Lower Saxony, which holds a 20 per cent stake in Volkswagen, said he was sure there would be “personal consequences” once the investigation is complete.
The shockwaves from the scandal enveloping Volkswagen were being felt far and wide across the sector as traders wondered who else may get embroiled. Germany’s Daimler AG, the maker of Mercedes-Benz cars, was down 6 per cent, while BMW AG fell 5.3 per cent. France’s Renault SA was 5.5 per cent lower.
“It’s an auto sector shaking incident,” said Connor Campbell, a financial analyst at Spreadex.