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New VW boss says scandal is 'severest test'

AFP · 29 Sep 2015, 16:28

Published: 29 Sep 2015 16:28 GMT+02:00

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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.

The German government has given VW until October 7th to outline how it plans to resolve the crisis that has rocked carmakers around the world and wiped €29 billion ($33 billion), or 38 percent, off VW's market capitalisation over the past ten days.

The group's new chief executive Matthias Müller, who was appointed on Friday, told senior management that an ambitious game plan had already been drawn up.

"We will present our technical solutions to the authorities in October," he said.

And once they have been approved, "we will inform customers and arrange the necessary appointments" for the cars to be refitted.

On September 18, 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.

In the wake of the revelations, the embattled auto maker faces incalculable costs and a potential tidal wave of litigation.

Müller described the crisis as "the severest test in (VW's) history."

"There is no justification for deception and manipulation," the 62-year-old manager said.

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

"Together, we can overcome this crisis and make Volkswagen an even better company."

On Monday, German prosecutors said they were looking to establish the exact chain of responsibility in the scam.

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

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

VW has already said it will set aside €6.5 billion 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 (€16.03 billion) in the United States, and the fallout on customer purchases cannot yet be estimated.

Story continues below…

Hometown hit

The scandal is also having repercussions in VW's hometown 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 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.

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 whom 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 football club, VfL Wolfsburg.

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