Volkswagen Admits 'Defeat Device' On 11 Million Engines Worldwide, Sets Aside $7.2B

Illustration for article titled Volkswagen Admits 'Defeat Device' On 11 Million Engines Worldwide, Sets Aside $7.2B

Things just went from catastrophic to apocalyptic as Volkswagen just admitted that the emission test cheating engine management software at the center of the Dieselgate controversy is installed in 11 million Volkswagen Group cars worldwide. They also say they’ll set aside $7.2 billion in just the third quarter to cover this mess.


The engine in question is the Type EA 189 common rail diesel, which they put into everything from Volkswagens to Audis, Skodas and Seats. Here’s the full statement:

Volkswagen is working at full speed to clarify irregularities concerning a particular software used in diesel engines. New vehicles from the Volkswagen Group with EU 6 diesel engines currently available in the European Union comply with legal requirements and environmental standards. The software in question does not affect handling, consumption or emissions. This gives clarity to customers and dealers.

Further internal investigations conducted to date have established that the relevant engine management software is also installed in other Volkswagen Group vehicles with diesel engines. For the majority of these engines the software does not have any effect.

Discrepancies relate to vehicles with Type EA 189 engines, involving some eleven million vehicles worldwide. A noticeable deviation between bench test results and actual road use was established solely for this type of engine. Volkswagen is working intensely to eliminate these deviations through technical measures. The company is therefore in contact with the relevant authorities and the German Federal Motor Transport Authority (KBA – Kraftfahrtbundesamt).

To cover the necessary service measures and other efforts to win back the trust of our customers, Volkswagen plans to set aside a provision of some 6.5 billion EUR recognized in the profit and loss statement in the third quarter of the current fiscal year. Due to the ongoing investigations the amounts estimated may be subject to revaluation.

Earnings targets for the Group for 2015 will be adjusted accordingly.

Volkswagen does not tolerate any kind of violation of laws whatsoever. It is and remains the top priority of the Board of Management to win back lost trust and to avert damage to our customers. The Group will inform the public on the further progress of the investigations constantly and transparently.

This news comes on the heels of announcements in Germany and Asia that other countries would start investigating diesel engines. Earlier today, South Korea’s deputy director for environmental issues told Bloomberg they “found it necessary” to begin an investigation into similar cars sold in their country.

It seems like Volkswagen has decided to get ahead of all of those investigations and just admit that the software is likely on all of the engines. Given that not everyone has the same air quality standards it’s possible that cars with the “defeat device” installed don’t violate the rules in all countries, which is something that regulators around the world are going to have to determine.

More as we have it.

UPDATE (7:54 AM): German magazine Der Tagesspiegel is reporting that CEO Martin Winterkorn is being replaced by Matthias Mueller.


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