FRANKFURT (REUTERS) - Volkswagen faces penalties of up to US$18 billion (S$25.3 billion) after being accused of designing software for almost 500,000 diesel cars that deceives regulators measuring toxic emissions.
The German automaker told US dealers to halt sales of some 2015 diesel cars on Sunday (Sept 20) and ordered an external investigation. It has also been hit with a mandatory recall of 500,000 Volkswagen and Audi vehicles from model years 2009-2015.
"Put simply, these cars contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test," Ms Cynthia Giles, an enforcement officer at the EPA, told reporters in a teleconference on Friday.
The feature masks the true emissions only during testing. When the cars are on the road, they emit as much as 40 times the level of pollutants allowed under clean air rules meant to ensure public health is protected, Ms Giles said.
Volkswagen can face civil penalties of US$37,500 for each vehicle not in compliance with federal clean air rules. There are 482,000 four-cylinder VW and Audi diesel cars sold since 2008 involved in the allegations. If each car involved is found to be in non-compliance, the penalty could be US$18 billion, an EPA official confirmed on the teleconference.
In a statement on Sunday, Volkswagen chief executive officer Martin Winterkorn said: "I personally am deeply sorry that we have broken the trust of our customers. Volkswagen has ordered an external investigation of this matter," he said.
The Detroit News reported late Friday that VW dealers still had some 2015 diesel Jetta, Passat and Beetle cars for sale.
A VW representative on Sunday confirmed the partial halt of sales of the affected vehicles but did not give any numbers.
Mr Winterkorn said: "We do not and will not tolerate violations of any kind of our internal rules or of the law." He added that the company was fully cooperating with the relevant agencies.
He gave no details on who would carry out the external investigation.
"This is not your usual recall issue, an error in calibration or even a serious safety flaw," Bernstein analysts wrote in a note on Sunday. "There is no way to put an optimistic spin on this. This is really serious."