The dirty cloud hanging over Volkswagen continues to grow.
The German automaker has admitted to installing software on millions of cars globally that turns on pollution controls during government tests and shuts them off on the road.
At first, the cheating appeared limited to small cars with four-cylinder diesel engines, mainly in Volkswagen-brand vehicles. But this week, the U.S. government accused Volkswagen of cheating on six-cylinder diesels in Volkswagen, Audi and Porsche cars and SUVs.
On Tuesday, the automaker revealed that it found other problems with emissions as the scandal spread to gasoline engines.
A look at where the scandal began and where it might be headed:
The scandal was exposed Sept. 18 when U.S. regulators announced that Volkswagen had put rogue software on 482,000 cars with four-cylinder diesel engines. Computers detected when the cars were being tested on treadmills, turning on controls that limit emissions of harmful nitrogen oxide. The controls were turned off when the cars went back on the road, spewing pollution at up to 40 times allowable limits. A few days later, Volkswagen admitted the software was on 11 million vehicles worldwide. Later in September, the Environmental Protection Agency confirmed it was investigating whether four-cylinder diesels on 2016 models had a different cheating device. The scandal expanded this week when the EPA said Volkswagen had put the cheating software on about 10,000 six-cylinder diesels in the U.S., including Porsche and Audi vehicles. Volkswagen denied the allegation. And on Tuesday, the company said it understated carbon dioxide emissions for 800,000 cars. For the first time, some gasoline engines were affected. A Volkswagen spokeswoman said she was told U.S. vehicles aren’t included.
The cars affected
The first batch of affected cars, with four-cylinder diesel engines, included the following U.S. models: the 2009-2015 Jetta and Audi A3, the 2010-2015 Golf, and the 2012-2015 Beetle and Passat. The additional software under investigation affects the same cars for the 2016 model year. The 10,000 cars with V6 diesel engines that the EPA says also cheated include the 2013 Audi Q7, the 2014-2015 Audi A6, A7, A8, Q5 and Q7 and the 2013-2016 VW Touareg. It’s unclear which models are among the 800,000 that emit too much carbon dioxide, but they’re mostly diesels. German officials say 98,000 have gas engines.
The impact on Volkswagen
The scandal has damaged the brand and drawn anger from customers who bought diesel cars thinking they were clean. It’s also draining Volkswagen’s treasury. The company has set aside 8.7 billion euros ($9.6 billion) to pay for recalls and penalties. But that’s likely to rise as lawsuits mount. Volkswagen lost 1.67 billion euros ($1.83 billion) in the third quarter, due largely to recall costs, and it warned that 2015 operating profit would fall significantly. Volkswagen’s ordinary shares have tumbled 23 percent since the scandal was revealed, and the total market value of the company has fallen by 24.2 billion euros – the equivalent of $26.3 billion at current exchange rates – to 52.75 billion euros, a drop of 31 percent. Volkswagen brand sales in the U.S. grew only slightly last month while the overall market was up 5.8 percent. But Audi sales rose 16.8 percent.
What owners should do
Not much at this point. In the U.S., owners could join one of over 200 class-action lawsuits alleging the cars have lost value. They could also try to sell their cars, but experts say it’s wise to hang on until a fix is announced. Volkswagen may compensate owners and could even buy back the cars. Regulators say the cars are safe to drive, even though they pollute too much. The fix will mean software changes and could include installing a treatment chemical with a tank. Volkswagen’s U.S. CEO says the fixes may hurt performance but not the window sticker mileage numbers.
It will take years for regulators from dozens of countries and states to untangle the scandal. Volkswagen faces big fines from governments and possible criminal charges. Employees also are likely to be charged. The company stopped U.S. sales of its six-cylinder diesels this week. And the company has yet to unveil the findings of an internal investigation being led by law firm Jones Day.