VW admits 1.8 million commercial vehicles involved in pollution scam

Volkswagen said that 1.8 million of its commercial vehicles worldwide are fitted with the sophisticated software enabling them to cheat emission tests.
Volkswagen said that 1.8 million of its commercial vehicles worldwide are fitted with the sophisticated software enabling them to cheat emission tests.PHOTO: AFP

FRANKFURT (AFP) - Volkswagen said Tuesday that 1.8 million of its commercial vehicles worldwide are fitted with the sophisticated software enabling them to cheat emission tests, as the auto giant's new chief warned the group was facing the "severest test in its history."

Confirming a German newspaper report, a spokesman for VW's commercial vehicles division said that out of the 11 million vehicles worldwide that the group has already said were involved "1.8 million are commercial vehicles."

After VW's upmarket subsidiary Audi and its Czech arm Skoda admitted that more than three million of their vehicles were similarly fitted, its Spanish unit Seat said 700,000 of its cars were also equipped with the technology.

In a crisis that has rocked carmakers around the world - and wiped 29 billion euros (S$46.5 billion) or 38 per cent off VW's market capitalisation over the past 10 days - the German giant was exposed by the US authorities of fitting its diesel cars 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.

As the embattled auto maker prepares for incalculable costs and a potential tidal wave of litigation from the ever-widening scandal, VW's new chief executive Matthias Mueller said in his first address to senior management on Monday evening that the group was "facing the severest test in its history."

"There is no justification for deception and manipulation," said the 62-year-old manager, who was appointed last Friday.

"The inconceivable misconduct that has come to light in Volkswagen over the past days pains me and angers me immensely," Mueller said.

- Setbacks expected

The carmaker - which in the first six months of this year had overtaken Toyota to become the world leader in terms of sales - needed to win back the trust it has lost, he said.

"For this, the affair needs to be cleared up ruthlessly. We need courage and fighting spirit. It will be difficult and... there will be setbacks. But we can and will do it," Mueller said.

"Together, we can overcome this crisis and make Volkswagen an even better company." On Monday, German prosecutors had said they were looking to establish the exact chain of responsibility in the scam, which is snowballing into one of the biggest scandal ever in the European automobile industry and even threatening to tarnish Germany's pristine engineering reputation.

They meantime opened an inquiry against the former CEO Martin Winterkorn, who insisted that he had not been personally aware of any wrongdoing on his part.

The German government is also piling on the pressure and has given the embattled auto giant until October 7 to outline how it plans to resolve the crisis.

In addition to Germany, national authorities in several other countries have announced probes. Japan on Tuesday joined a long list of countries in ordering some of the country's biggest automakers to report on whether their diesel vehicles meet Japanese standards.

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

VW 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, VW also faces onerous regulatory fines, including up to $18 billion in the United States, and the fallout on customer purchases cannot yet be estimated.

- Home town hit

The scandal is also having repercussions in VW's home town of Wolfsburg, in northern Germany, which has imposed an immediate freeze on spending and hiring in the public administration in case its finances are adversely affected.

"It is still too early to talk about concrete numbers. But it seems clear to us that we can already expect a sharp drop in business tax revenues this year," Mohrs said.

Wolfsburg's budget amounted to nearly 430 million euros (S$689.6 million) this year and the business tax VW has to pay, calculated on the basis of its annual turnover, is a significant source of revenue for the town's coffers.

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

It has a population of around 124,000, more than half of which works for VW. And the town's skyline is dominated by the sprawling manufacturing plant and a massive version of the group's blue-and-white circular logo.

Volkswagen also sponsors and finances a long list of sporting and cultural activities in the town, including its premiere league soccer club, VfL Wolfsburg.