Shares in scandal-plagued German automaker Volkswagen AG (VLKAY) are in freefall Wednesday after the company dropped a new bombshell over its vehicles’ emissions levels.
The group’s preferred shares have fallen over 10% in early trading in Frankfurt to their lowest level in over five years VW admitted late Tuesday that it had found “irregularities” in how it presented the fuel consumption data of various models during their certification.
In a move that highlights the company’s growing credibility problem, the stock market has wiped over 5.5 billion euros off its market capitalisation for a problem that VW estimates will cost it €2 billion.
VW shares now fallen by over a third since the emissions scandal first broke in September. According to its statement,
Under the ongoing review of all processes and workflows in connection with diesel engines it was established that the CO2 levels and thus the fuel consumption figures for some models were set too low during the CO2 certification process. The majority of the vehicles concerned have diesel engines.
In layman’s terms, that means that VW’s claims about some cars’ fuel efficiency were as bogus as those about the nitrous oxides emission levels of its diesel engines. The company said around 800,000 cars across the group were affected. And as the last sentence of the text above implies, the problem affects cars with gasoline engines as well as diesel ones. Transport Minister Alexander Dobrindt told parliament Wednesday that 98,000 of the 800,000 affected vehicles ran on gasoline.
“In testing for CO2 emissions, measures were taken by VW to manipulate the data on fuel consumption lower,” Dobrindt said.
On a per-car basis, the new issue looks to be much more expensive to fix (as it won’t be just a case of tweaking some software). The company puts “the economic risks” at 2 billion euros ($2.2 billion). That compares to the €6.7 billion it set aside to fix 11 million diesel vehicles in September. In addition to the need to fix the engines involved, the company also faces a new liability versus the tax authorities: Germany’s vehicle tax is graded according to CO2 emissions, which means that the affected cars have been treated too generously so far. Dobrindt said he would make sure that any any extra tax liabilities, which will be calculated retroactively, will be presented to VW rather than drivers.
One melancholy consolation for the Wolfsburg-based group is that it has at least made this new disclosure itself, rather than being forced into it by the regulators.
“From the very start I have pushed hard for the relentless and comprehensive clarification of events,” said CEO Matthias Müller. “This is a painful process, but it is our only alternative.”
Müller’s own role in the diesel scandal is now in the spotlight in the wake of accusations by the Environmental Protection Agency that Porsche, the unit that he headed until his promotion last month, had also installed ‘defeat devices’ to mask actual emissions levels from cars it sold in the U.S.. VW rejects that claim, but has temporarily withdrawn the diesel version of the Porsche Cayenne from sale in the U.S..
The company’s board in a separate statement said it is “deeply concerned by the discovery” and would meet “in the very near future” on what further steps to take.
The emissions scandal is starting to show signs of hitting the group’s sales. Reuters reported Tuesday that VW was the only brand of Germany’s top carmakers to post lower sales in a growing German market in October, citing figures from the Federal Motor Transport Authority (KBA). New registrations of the VW brand fell 0.7 percent while BMW, Opel and Mercedes all reported higher deliveries in a market that was up 1 percent to 278,000 cars.
UPDATE: This story has been updated to include Transport Minister Alexander Dobrindt’s comments.