Volkswagen draws up refit plan for cars in emissions cheating scandal

The logo of German car maker Volkswagen (VW) is seen at Northern Virginia dealer in Woodbridge, Virginia on Sept 29, 2015.
The logo of German car maker Volkswagen (VW) is seen at Northern Virginia dealer in Woodbridge, Virginia on Sept 29, 2015. PHOTO: AFP

FRANKFURT (AFP) - Volkswagen on Tuesday revealed a plan to refit millions of vehicles affected by a worldwide pollution-cheating scam, as its new chief vowed to act ruthlessly to overcome the "severest test" in the car giant's history.

The German government has given Volkswagen until Oct 7 to explain how it will resolve the scandal, which has wiped 29 billion euros (S$46.48 billion), or 38 per cent, off VW's market value in 10 days.

Chief executive Matthias Mueller, who took the Volkswagen steering wheel on Friday, told senior management that technical solutions would be submitted in October.

Once approved by the German authorities, Volkswagen will inform customers and arrange for the cars to be refitted, he told managers late Monday, according to remarks released by the firm.

The carmaker later released a statement saying owners of the affected cars would be notified "in the next weeks and months", adding that "all the brands concerned are going to create Internet pages where clients will be able to follow developments".

Volkswagen, the world's biggest carmaker by sales, has admitted that up to 11 million diesel cars worldwide are fitted with devices that can switch on pollution controls when they detect the car is undergoing testing.

They then switch off the controls when the car is on the road, allowing it to spew out harmful levels of emissions.

CEO Mueller insisted that the software was not activated in all 11 million vehicles, however, and the number of vehicles actually needing a refit would be fewer than that.

Nevertheless, with the embattled auto maker facing incalculable costs and a potential tidal wave of litigation, CEO Mueller described the crisis as "the severest test in (VW's) history."

Volkswagen's upmarket subsidiary Audi and its Czech arm Skoda have admitted more than three million of their vehicles were fitted with the suspect devices, while Spanish unit Seat has said 700,000 of its cars were also equipped with the technology.

A spokesman for Volkswagen's trucks division said that 1.8 million light commercial vehicles were involved.

A YouGov opinion poll revealed that Volkswagen's image among German consumers has taken a severe hit and is now no better than Daimler's city runaround, the Smart.

German prosecutors have led probes by several countries into the scandal, and on Monday they said they were opening an inquiry against the former CEO Martin Winterkorn.

He has insisted he was not personally aware of any wrongdoing on his part, but Volkswagen board member Olaf Lies said those responsible for the scandal have to take "personal responsibility".

"Those people who allowed this to happen, or who made the decision to install this software - they acted criminally. They must take personal responsibility," Mr Lies, also economy minister of the northwestern German state of Lower Saxony, told broadcaster the BBC.

"Huge damage has been done because millions of people have lost their faith in Volkswagen. We are surely going to have a lot of people suing for damages."

Several countries besides Germany have also opened probes, and on Tuesday Japan said it was ordering some of the country's biggest automakers to report on whether their diesel vehicles meet standards.

Lawsuits, including class-action litigation, are also being filed in the United States.

Volkswagen has already said it will set aside 6.5 billion euros in provisions in the third quarter, but analysts suggest one to three billion euros more could be needed.

On top of that, Volkswagen also faces onerous regulatory fines, including up to US$18 billion (S$25.64 billion) in the US - and the fallout on customer purchases cannot yet be estimated.

Germany's economy minister, Sigmar Gabriel, has promised to support the Volkswagen group's 600,000 employees who he said do not deserve "to pay for the faults of their managers".

And the German automobile federation VDA has weighed in against calls to reject diesel cars altogether, denouncing what it said was an "anti-diesel lobby" acting in a "completely unjustified" way.

The repercussions of the scandal can be clearly seen in Volkswagen's hometown of Wolfsburg, in northern Germany, which has imposed an immediate freeze on spending and hiring in the public administration.

The business tax Volkswagen has to pay - calculated on the basis of its annual turnover - is a significant source of revenue for the town's coffers.

Located 200 kilometres west of Berlin, Wolfsburg was founded in 1938 with the construction of the first factory to build the carmaker's iconic Beetle model.

More than half of the town's population of around 124,000 work for Volkswagen, which finances a long list of local sporting and cultural activities, including the premiere league football club VfL Wolfsburg.