Volkswagen admits global diesel cheating, sets aside $7.3bn for repairs
Volkswagen confirmed 11 million diesel vehicles worldwide are fitted with emissions-cheating software and allocated €6.5bn to cover recalls, repairs and customer trust measures.
Volkswagen has admitted that 11 million diesel vehicles worldwide are fitted with software designed to cheat emissions tests, prompting the company to allocate €6.5 billion (about $7.3 billion) to cover repairs, recalls and measures aimed at regaining customer trust. The admission, made in September 2015, marks one of the most extensive emissions scandals to hit the automotive sector, with repercussions for owners, dealers, investors and regulators across multiple continents.
The software, installed in cars with the EA 189 diesel engine, was engineered to detect when the vehicle was undergoing official emissions testing and activate full pollution controls. In normal driving, the cars reverted to a mode that emitted nitrogen oxides at up to 40 times the legal limit. Volkswagen’s initial admission followed investigations by the US Environmental Protection Agency (EPA) and California Air Resources Board, which uncovered discrepancies in nearly half a million US vehicles. Further internal investigation revealed the same defeat device had been fitted to millions more vehicles globally.
Volkswagen’s statement acknowledged a “noticeable deviation” between laboratory and real-world emissions for the affected models. The company said the $7.3bn fund was intended to cover technical measures, recalls and other efforts to restore confidence. However, Volkswagen warned that the amount might not be sufficient given the scale of the problem and ongoing investigations in the US, Germany, France, South Korea, Canada and other markets. US authorities alone signalled potential fines of up to $18 billion, and the US Justice Department launched a criminal probe.
Impact on owners and dealers
Owners of affected vehicles, particularly in the US, face uncertainty over how repairs will affect performance and fuel economy. Volkswagen has yet to specify the technical fix, but industry analysts have warned that bringing emissions into compliance could reduce power or efficiency. Dealers in North America and Canada were instructed to halt sales of impacted diesel models, including the Jetta, Golf, Beetle, Passat and Golf SportWagen, while regulators determine the scope of the recall and required modifications.
Across Europe and Asia, regulators opened their own investigations as the scandal spread. Germany’s Federal Motor Transport Authority (KBA) began testing all Volkswagen diesel models, while France called for a Europe-wide probe. South Korea summoned VW officials for explanation and announced plans to launch its own emissions tests. The reputational damage extended beyond Volkswagen, with shares in other carmakers such as Daimler and BMW also falling sharply.
Executive fallout and corporate response
Chief executive Martin Winterkorn apologised publicly, stating he was “deeply sorry” for breaking the trust of customers and the public. He resigned days after the admission, as speculation mounted over further executive changes. Volkswagen’s US CEO, Michael Horn, told an audience in New York that the company had “totally screwed up” and pledged to make things right with regulators, customers and dealers.
Volkswagen insisted that its new EU6-compliant diesel vehicles met all legal requirements, but provided few details on how it would address the 11 million affected cars. The company said it was working “at full speed” to clarify the irregularities and promised to keep authorities and the public informed.
What happens next for Volkswagen
With investigations ongoing and the full cost of recalls, legal action and compensation still unclear, Volkswagen’s €6.5bn provision may only be the start. The company faces a lengthy process to repair vehicles, compensate owners and restore its reputation in the wake of a global scandal that has already reshaped the diesel market and prompted scrutiny of emissions testing practices worldwide.
- Volkswagen admitted 11 million vehicles have emissions-cheating software.
- The company set aside €6.5bn ($7.3bn) for recalls and repairs.
- US authorities identified 482,000 affected vehicles and launched a criminal probe.
- CEO Martin Winterkorn resigned after the scandal broke.
