Could This Cause The Global ‘Crash’?


BERLIN (AP) — Volkswagen CEO Martin Winterkorn stepped down Wednesday over a scandal in which the German carmaker admitted to rigging its diesel cars’ emissions to pass U.S. tests.

In a statement, Winterkorn said he took responsibility for the “irregularities” found in diesel engines but that he was “not aware of any wrongdoing on my part.”

No replacement for the post of CEO was announced.

“Volkswagen needs a fresh start — also in terms of personnel,” he said. “I am clearing the way for this fresh start with my resignation.”

Winterkorn said VW must continue the process of “clarification and transparency.”

“This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis,” he added.

Following his statement, VW’s share price was up 8.7 percent at 121 euros.

Still, it has a long way to make up for the declines that saw nearly 25 billion euros (around $28 billion) wiped off the company’s market value.

Winterkorn had come under intense pressure since last Friday’s disclosure from the Environmental Protection Agency that the company had tried to dupe testers over emissions coming from its diesel cars.

His contract was scheduled to be extended by two years through 2018 at a meeting this Friday of the supervisory board.

The Environmental Protection Agency has said Volkswagen AG could face fines of as much as $18 billion. Other countries, such as South Korea, have also ordered investigations into emission levels of VW cars and some law firms in North America have filed class-action suits.

On Tuesday, Volkswagen said 11 million of its vehicles worldwide contained the so-called “defeat device” that allowed the cars to beat the testers. Its revelation was a stunning increase from the 482,000 cars previously identified by the U.S.’s Environmental Protection Agency.

___

The auto behemoth is Germany’s largest car maker and biggest employer, with 270,000 people on staff.

But that is just a fraction of the number that could be affected if the fallout spreads to suppliers and other automakers in Germany — Europe’s largest economy — where nearly a million people are employed by the car industy alone.

“All of a sudden, Volkswagen has become a bigger downside risk for the German economy than the Greek debt crisis,” ING chief economist Carsten Brzeski told Reuters.

“If Volkswagen’s sales were to plunge in North America in the coming months, this would not only have an impact on the company, but on the German economy as a whole.”

The US Environmental Protection Agency says Volkswagen could face penalties reaching $AU25 billion over rigged emissions tests on its cars.

A staggering $28 billion was wiped off the company’s value this week, with some experts wondering whether it will be able to survive?

“That’s why this scandal is not a trifle. The German economy has been hit at its core,” said Michael Huether, head of Germany’s IW economic institute.

The German government has talked down the broader impact, insisting the “highly innovative and very successful industry” would remain an “important pillar” of the German economy.

In a statement announcing his departure, outgoing CEO Mr Winterkorn said he was “shocked by the events” and stunned that misconduct on such a scale was possible.

“As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part,” he said.

“Volkswagen needs a fresh start — also in terms of personnel. I am clearing the way for this fresh start with my resignation.”

Mr Winterkorn said the company must continue to seek the truth behind the scandal, saying it’s “the only way to win back trust.”

“I am convinced that the Volkswagen Group and its team will overcome this grave crisis.”

Junked: The scandal has led to threats of a ratings downgrade from Fitch which could lead to increased borrowing costs for the car maker. Michael Sohn.

Junked: The scandal has led to threats of a ratings downgrade from Fitch which could lead to increased borrowing costs for the car maker. Michael Sohn.Source:AP

The resignation caps off a horrific few days for the famed German car manufacturer after research by the International Council on Clean Transportation alleged the company used “defeat devices” on diesel cars between 2009 and 2015 to circumvent the results of emissions test. The stunning results were found after simply driving the cars on five routes and finding a huge discrepancy between their testing results and real-life performance.

On Tuesday, Volkswagen admitted 11 million of its cars around the world contained the device, a huge jump from the 482,000 initially identified by the US Environmental Protection Agency.

The company now faces fines that could run into the tens of billions of dollars in the US while other countries are launching investigations of their own. German public prosecutors are also considering launching a criminal inquiry into what went on at the company.

Mr Winterkorn initially admitted Volkswagen had “totally screwed up” and set $10 billion aside to cover the costs of the scandal. However by Wednesday pressure had become to much to bear and he finally stepped down.

The decision led to a bounce in sharemarkets for the company which saw $28 billion wiped off its value this week. Volkswagen said it will announce a new chief executive on Friday.

It’s been a rough few days for the previously beloved brand that makes the iconic beetle and golf cars. Picture: Odd Anderson.

It’s been a rough few days for the previously beloved brand that makes the iconic beetle and golf cars. Picture: Odd Anderson.Source:AFP

Nitrogen oxide gasses can cause breathing problems and lung infections in humans and in 2012 the World Health Organisation classified diesel fumes as cancer-causing. They can also damage the environment, naimals and plants and are a key contributor to global warming.

The testing revealed Volkswagen cars were spewing out up to 40 times more pollution than allowed under Environmental Protection Agency limits.

Senior Fellow at the International Council on Clean Transportation John German, who discovered the extraordinary result said they ran the program to show “US diesels are clean”.

Instead, it led to one of the biggest scandals in car manufacturing history which has left the future of the company in doubt and will likely force them to have to recall nearly 500,000 cars including the Jetta, Golf, Beetle and Audi A3 models dating back to 2009.

——

Editors Comment:

The CEO has forgotten that a climate of trust must come before a climate of change, and we are again steering down the barrel of a climate of economic chaos, with this scandal possibly tipping the German economy over the edge.


Sources:

http://news.yahoo.com/volkswagen-ceo-steps-down-amid-152244992.html

http://www.news.com.au/finance/business/volkswagen-boss-martin-winterkorn-resigns-over-emissions-scandal/story-fnkgdhrc-1227541246851