Volkswagen Shares Dive on New Emissions Woes

VW says widening emissions-testing scandal could affect about 800,000 more cars, bringing in gasoline-powered vehicles

By William Boston

Nov. 4, 2015

Shares in Volkswagen AG plunged Wednesday after the car maker said its emissions-testing scandal had widened beyond what was previously disclosed, now encompassing a broader set of infractions that could affect about 800,000 more cars and cost it at least an extra $2 billion.

Shares were down 8.4% just after the market opened.

The German auto maker said Tuesday it understated the level of carbon-dioxide emissions of the additional cars when providing information to regulators. Some of these cars were gasoline-powered, Volkswagen said, moving the violations beyond the company's diesel fleet for the first time.

Volkswagen disclosed the error after conducting its own emissions tests. The report is a fresh blow after VW's admission in September [1] that up to 11 million diesel-powered vehicles world-wide could have so-called defeat devices that lowered tailpipe emissions of nitrogen oxides during laboratory testing.

Volkswagen initiated an internal investigation after saying that some diesel-powered cars of model years between 2009 and 2015 used software that let them reduce nitrogen-oxide emissions during tests. U.S. and European authorities have begun regulatory and criminal investigations.

Tuesday's disclosure is the first to involve the greenhouse gas carbon dioxide, which has been a focus of both European and U.S. authorities over the past decade.

Since the first disclosures in September, VW has reshuffled top management [2] and suspended senior executives [3] in charge of engine development. The new team is scrutinizing the company's entire fleet of automobiles.

The Wolfsburg, Germany-based company's supervisory board said it was "deeply concerned" about the revelation VW misstated carbon-dioxide emissions in addition to cheating on nitrogen-oxide tests. The board said it intended to meet soon "to consult on further measures and consequences."

The company said it was in contact with regulatory agencies to determine steps needed to clarify the situation and to establish accurate values for the carbon-dioxide emissions of the affected vehicles.

"From the very beginning I set out to ensure that we mercilessly and completely clear up this situation," said Volkswagen Chief Executive Matthias Muller. "This is a painful process but there is no alternative."

Volkswagen, Europe's largest auto maker, gave no details about which vehicles or engines are affected by the misstated carbon-dioxide levels. Industry analysts said cars sold in Europe were likely most affected.

In providing an estimate of financial risk from its new disclosure--(EUR)2 billion, or $2.19 billion--VW didn't say how it reached the figure. Last week, it recorded a charge to earnings [4] of (EUR)6.7 billion to pay the costs of fixing diesel cars affected by software that could lower emissions during testing.

"VW is leaving us speechless," said Arndt Ellinghorst, an automotive analyst at Evercore ISI, a research group.

Tuesday's disclosure came a day after the U.S. Environmental Protection Agency leveled new allegations. The EPA said it found defeat devices on 3.0-liter diesel engines used in larger sport-utility vehicles from against Volkswagen such as its Touraeg, Porsche Cayenne, Audi Q5 and Q7 SUVs and Audi A6 and A8 sedans. The agency said the vehicles it tested had nitrogen-oxide emissions up to nine times the allowable standard.

Volkswagen disputed the EPA's claims, saying it didn't install any emissions-cheating software on the engines used in these vehicles.

The auto maker disclosed the carbon dioxide misstatements after the close of trading in Germany.

Monday's allegations by the EPA hit Porsche, a Volkswagen sports-car brand and big profit center, for the first time. Mr. Muller previously ran Porsche, and the latest news raised questions of what he might have known about engines at Porsche.

Some investors in Europe sold shares on concern that the new EPA allegations could threaten Mr. Muller just over a month after he took charge [5] in the wake of Volkswagen's admission that it had cheated on emissions tests on millions of small and midsize diesel-powered vehicles.

That admission led to the resignation of Martin Winterkorn, the former CEO, and catapulted Mr. Muller from head of Porsche AG to chief of Volkswagen. Now, some analysts are asking whether an insider is the right person to lead Volkswagen out of the worst crisis in the company's 78-year history.

"The allegations are all the more serious given that VW's new CEO Matthias Muller came from Porsche and any hint of further deception could well see his position come under scrutiny," said Michael Hewson, chief market analyst at CMC Markets, a brokerage firm.

Mr. Muller became Porsche's chief in 2010. An insider, he was a protege of his predecessor and was liked by the Porsche-Piëch clan that controls Volkswagen's voting stock. He oversaw Volkswagen group product planning from 2007 to 2010.

"There was always a chance that Porsche and Audi would be directly or indirectly involved in the diesel saga," said David Buik, a market commentator at Panmure Gordon.

Volkswagen's diesel woes have kept investors on edge but seem to have had little effect on German consumers. Germany's motor vehicle agency reported Tuesday that registrations of new diesel-powered cars rose 6% in October.

"Diesel is a key technology for us," said Harald Kruger, BMW AG chief executive, during an earnings call on Tuesday. "At the moment, we are seeing no impact on sales from the diesel issue, but I must add that it is still early days."

Write to William Boston at