Following the revelation that Volkswagen had cheated on emissions testing in diesel cars sold in the U.S., things have not been going well for the company.
Volkswagen shares fell 20% Monday, hitting $145.62 (€129.50) in the largest stock price fall in Volkswagen's history, reports Reuters. The share fall comes one day after Volkswagen CEO Martin Winkertorn issued a statement apologizing for having "broken the trust" between the company and the public.
The Associated Press reports the stock tumble wiped $16.9 billion (€15 billion) off of Volkswagen's market value.
BREAKING: #Volkswagen's shares fall 25% after U.S. emissions scandal http://t.co/5ZD5WGl9PJ pic.twitter.com/uWAUH3hUDi
— Bloomberg Business (@business) September 21, 2015
The U.S. Environmental Protection Agency (EPA) accused Volkswagen of cheating on emissions tests with 482,000 four-cylinder diesel cars sold in the U.S with software designed to sidestep regulations. These cars were installed with a "defeat device," which is designed to detect when the car is undergoing emissions testing and activate all the emissions control hardware only then.
In normal driving, the emissions controls would loosen, producing up to 40 times the amount of nitrogen oxide than the car would during testing. Increased nitrogen-oxide pollution can contribute to higher respiratory problems and even premature death in humans.
Diesel cars pollute more than their gasoline powered counterparts, but emissions controls tend to strangle the power of an engine. Volkswagen likely wanted to maintain the strong performance of its four-cylinder diesels, while still passing emissions regulations in the U.S.
Many modern diesel-equipped cars require a urea additive, called AdBlue, to cut down on emissions. AdBlue helps with emissions, but the systems are expensive and complex. The cars implicated in this scandal -- including the 2009 to 2015 Volkswagen Golf, Beetle, Jetta and Beetle, the 2014 to 2015 Volkswagen Passat and the 2009 to 2015 Audi A3 -- don't use urea additives. The company has yet to recall the cars affected, but it's a question of when, rather than if.
Also uncertain is the future of Volkswagen and diesel in general in the U.S. Other automakers that sell diesel passenger cars will surely come under scrutiny, but a BMW X5 tested by the same organization who uncovered the Volkswagen defeat device did not have the same issue. The maximum fine Volkswagen faces is $18 billion, at $37,500 per car. While the company probably won't need to pay out that much, additional lawsuits are eminent as Volkswagen proudly advertised these cars as being clean diesels. A class action lawsuit has already been filed in the U.S.
Jalopnik reports Volkswagen deleted all of the advertisements for its diesel cars of its YouTube, but the ads remain hosted elsewhere. Customers are understandably upset at the deception.
I've loved my @VW diesel wagon, bought in large part b/c of its clean tech. It'll likely be my last. http://t.co/yrzFFBwkCh
— Julia Rosen (@juliarosen) September 21, 2015
Just plain wrong. I own one of these cars, so bring the fine & recall, but w/ this crap, I don't want to own a VW http://t.co/FfCw1YWNFP
— Josh Tewksbury (@tewksjj) September 20, 2015
It's unclear exactly what will happen to Volkswagen from this point, but the outlook is dismal at best. The company blatantly broke the law and will suffer great consequences for doing so.
Between the massive loss in valuation, inevitable E.P.A. fines, possible sales drop, and potential class action lawsuits, this will cost the VW -- the world's biggest automaker -- a fortune.