Get a demo Do I subscribe? News sign-up
Print

VW faces reputation meltdown

News, 23 September 2015
Topics

NEW YORK/SEOUL: The ripples continue to spread from Volkswagen's weekend admission that the carmaker had rigged diesel emissions tests in the US, as more countries announce investigations and drivers face the recall of vehicles being driven illegally.

Michael Horn, Volkswagen's US chief executive, said at an event in New York on Monday that the company had "totally screwed up" and promised to make amends.

Sales of affected versions of the relevant models have already been suspended in the United States and Canada, Reuters reported, while Germany has ordered an examination of all VW's diesel cars and South Korea – where VW is among the best-selling foreign brands – has said it will carry out emissions tests on several models, including the VW Jetta and Golf and the Audi A3.

"If South Korean authorities find problems in VW diesel cars, the probe could be expanded to all German diesel cars," said an official at the environment ministry. But Daimler and BMW have said the accusations against VW did not apply to them.

"Volkswagen's brand value is expected [to] be hit by this issue as its strong diesel engine technology has been the backbone of its brand recognition," Yim Eun-young, an analyst at Samsung Securities, told the Financial Times.

The FT noted that most of the world outside Europe is averse to diesel engines because of their production of nitrous oxide, a pollutant that causes smog, respiratory illness and increased death from heart and lung disease and said that VW's apparent "blithe disregard for the effect on US health" was one reason for the response of stock markets – VW shares fell 20% on Monday.

Volkswagen – the world's biggest carmaker by sales – is facing possible criminal charges and penalties of up to $18bn in the US, based on fines per vehicle, with the cost of the recall on top of that, although The Economist thought that such a harsh penalty was unlikely. "Perhaps the most damage will be done to VW's reputation," it said.

And not just Volkswagen, as German media reaction was that the deception was, in Handelsblatt's words "a disaster for the entire German automotive industry".

Data sourced from Reuters, Financial Times, Economist, Handelsblatt; additional content by Warc staff

Topics