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Volkswagen says 11 million vehicles involved in emissions scandal

Published:Tuesday | September 22, 2015 | 10:23 AM

The crisis enveloping Volkswagen AG, the world's top-selling carmaker, escalated Tuesday as the company issued a profit warning following a stunning admission that some 11 million of its diesel vehicles worldwide were fitted with software at the centre of a United States emissions scandal.

The German company said it was setting aside around €6.5 billion (US$7.3 billion) to cover the fallout from the scandal that has tarnished VW's reputation, raised questions over the future of CEO Martin Winterkorn and battered its share price.

The shock waves from the scandal enveloping Volkswagen were being felt far and wide across the sector as traders wondered who else may get embroiled.

The scandal is hugely damaging to a business that relies heavily on a hard-won reputation for quality and trustworthiness.

The trigger to the company's market woes was last Friday's revelation from the US Environmental Protection Agency that VW rigged nearly half a million cars to defeat US smog tests.

The company then admitted that it intentionally installed software programmed to switch engines to a cleaner mode during official emissions testing. The software then switches off again, enabling cars to drive more powerfully on the road while emitting as much as 40 times the legal pollution limit.

"In my German words: we have totally screwed up," the head of Volkswagen's U.S. division, Michael Horn, told an audience in New York on Monday.

In its statement Tuesday, Volkswagen gave more details, admitting that there were "discrepancies" related to vehicles with Type EA 189 engines and involving some 11 million vehicles worldwide. The number of vehicles involved is more than the 10 million or so cars it sold in 2014.

Volkswagen said it is "working intensely" to solve the problem and that it "does not tolerate any kind of violation of laws whatsoever."

To cover the necessary service measures and what Volkswagen says are "other efforts to win back the trust" of customers, the company said it is setting aside some 6.5 billion euros in the current quarter. There was no mention of fines or penalties in the company's statement. The EPA has indicated that it could, in theory, fine VW up to US$18 billion.