Volkswagen shares plunged Monday after U.S. regulators accused the German automaker of cheating on emissions tests, alleging that nearly 500,000 cars weren’t meeting federal standards.

An apology Sunday from VW’s chief executive did nothing to temper anxious investors, who wiped out nearly a fifth of the company’s value in a single day. VW’s stock closed the day Monday at 132.20 euros, down 19 percent.

The Environmental Protection Agency alleges that the automaker had designed software to let its diesel cars detect when they were being tested for emissions.

In the lab, the cars met standards. On the road, regulators say, they emitted nitrous oxide at up to 40 times federal standards. The software, known as a “defeat device,” was installed in some 482,000 cars, spanning model years 2009 through 2015, regulators say.

VW, one of the world’s largest automakers, has halted sales of some vehicles in the United States and pledged to cooperate with regulators. “We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused,” Martin Winterkorn, VW’s chief executive, said in a statement.

The EPA and California regulators began asking questions in May 2014 after West Virginia University researchers published a study that found lab results did not match up with road tests.

For more than a year, VW told regulators that the difference owed to “various technical issues and unexpected in-use conditions,” the EPA said in a letter sent to the automaker Friday. But company officials didn’t admit to the practice until earlier this month when regulators threatened not to approve its 2016 line of diesel cars.

The years-long practice could carry a hefty price tag for the automaker. The company could be fined $37,500 for each car it sold with a defeat device installed – a potential fine of $18 billion.

“The company will have to recall nearly 500,000 affected cars, which will cost it millions of dollars, and that’s even before the damage to its brand and potential fines,” Michael Hewson, chief market analyst at CMC Markets, told the Associated Press.

It will be tough for VW to win back customers’ trust. Consumer Reports has pulled its recommendation of VW’s Jetta and Passat diesel model. (The magazine said it would reconsider its decision once the automaker introduces a fix to lower emissions.)

Jack Fitzgerald, owner of Fitzgerald Auto Group, has Volkswagen dealerships in Maryland. He said he has been told by Volkswagen corporate office not to sell any more Volkswagen diesels.

“Anything that is in inventory, we have parked and are not going to sell it,” Fitzgerald said. “All [Volkswagen has] told us so far is not to sell them.”

Fitzgerald said it was too soon to gauge customer reaction

“I haven’t [heard from customers]. But I will. It just happened. There is nothing we can do. There is no correction for it, yet.”


In Germany, the allegations have sparked a firestorm of recriminations even as the government in Berlin said it would launch its own investigation into possible wrongdoing. Specifically, Germans officials said they would probe whether the company – or any German automaker for that matter – was willfully trying to do the same on European streets.

German authorities also called on VW to fully cooperate with the U.S. investigation.

“We expect the automobile manufacturers to provide reliable information, so that the Federal Office for Motor Vehicles … can investigate whether comparable manipulations of the exhaust system have taken place in Germany and Europe as well,” Environment Ministry spokesman Andreas Kubler said in Berlin.

German politicians and pundits, meanwhile, expressed shock, outrage and concern over the possible blow to the reputation of German industry, considered the lifeblood of Europe’s largest economy. Germany’s great corporate success, commentators noted, has stemmed precisely from the perception of its world renown manufacturers as being synonymous not only with quality, but also integrity.

“I think it is clear that this is a bad incident and that we are concerned that the rightfully excellent reputation of the German automobile industry and Volkswagen in particular will suffer,” said German Vice Chancellor Sigmar Gabriel.


Thomas Fromm, a commentator in the daily Suddeutsche Zeitung, wrote: “A serious crisis of confidence is looming, but not only for VW. The case could rub off on other German manufacturers.”

On Sunday, Volkswagen chief Winterkorn attempted to do damage control, saying in a statement that “the Board of Management at Volkswagen AG takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter.”

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