In light of the biggest scandal to face the German carmaker Volkswagen (“VW”) in its 78-year history, the company’s CEO, Martin Winterkorn, resigned earlier this morning. The scandal involved the company’s manipulation of vehicle emission test results so that it appeared the affected vehicles were abiding by various state and federal emission regulations. The scandal has rocked VW as well as the rest of the car industry.
Specifically, people at VW utilized “defeat device” software to fool United States emissions tests on diesel cars into “believing” they met certain environmental standards. The defeat devices made sure that the actual emission levels, which were in some cases 40 times the level legally permitted in the United States, were hidden. This hidden software, which switches a vehicle’s engine to a much cleaner mode during testing, may have been installed in over 11 million cars worldwide.
Winkerton said that he acknowledged responsibility for “irregularities found in diesel engines” but claims he did not know anything about the alleged engine manipulation. He stated that, “I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.” He also stated that he is quitting for the good of the company adding that, “Volkswagen needs a fresh start - also in terms of personnel. I am clearing the way for this fresh start with my resignation. The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.”
The fallout is extreme, to put it mildly. At least 482,000 cars will be recalled and VW could face penalties of greater than $18 billion in the United States alone. Already, a United States law firm indicated that it was suing the company, stating that car buyers had not gotten what they paid for and that their cars are now likely worthless. Not to mention the criminal investigations that will be conducted, led by the United States Justice Department as well as various state attorneys general.
Meanwhile, the German Chancellor Angela Merkel urged VW to move “as quickly as possible” to restore confidence in the company. German prosecutors indicated they were conducting an initial investigation into the vehicle testing manipulations. French Energy Minister Segolene Royal stated that French penalties would be “extremely severe” if any evidence of wrongdoing was uncovered.