Volkswagen faces more pressure as bad news piles up

FRANKFURT, Germany – Investors and regulators put more pressure on Volkswagen on Wednesday after the company said it had understated the carbon dioxide emissions for 800,000 cars, widening its scandal over cheating on U.S. engine tests.

Amid concerns over the escalating cost of the crisis, the German carmaker’s ordinary shares slid 9.5 percent.

The company has been unable halt the flow of bad news since the scandal broke Sept. 18, when the U.S. Environmental Protection Agency said Volkswagen had installed software on 482,000 cars that enabled them to cheat on emissions tests for one pollutant, nitrogen oxide. The software reduced emissions when the car was on a test stand. Up to 11 million Volkswagen vehicles worldwide have the software.

The carmaker said late Tuesday it had also found “unexplained inconsistencies” in emissions from some of its vehicles of carbon dioxide, a gas that scientists say contributes to global warming.

The cars were sold under the Volkswagen, Audi, SEAT and Skoda brands, most of them in Europe and none in the United States. Involved were 1.4-, 1.6- and 2.0-liter diesel engines and a 1.4-liter gasoline engine with fuel-saving cylinder deactivation technology.

The company said the carbon dioxide problem could cost it $2.2 billion, on top of the more than $7 billion it had already set aside to cover the costs of recalls. Analysts say the total costs in fines and lost sales could be several times that.

The widening scandal prompted Moody’s Investors Service on Wednesday to cut the rating on the Volkswagen’s debt. The agency cited “mounting risks to Volkswagen’s reputation and future earnings” from this week’s new developments.

The EU’s executive Commission told Volkswagen to speed up its investigation.

“Public trust is at stake here,” spokeswoman Lucia Caudet told reporters on Wednesday. “We need all the facts on the table.”

The Commission has enforcement powers to ensure that manufacturers respect their obligations in terms of carbon dioxide emissions, including the possibility of imposing fines.

Germany’s transport minister indicated that VW will be on the hook for the costs of higher car taxes following the revelation that carbon dioxide emissions were understated.

Transport Minister Alexander Dobrindt noted that Germany’s car tax is calculated on the basis of engine size and carbon dioxide emissions, and so “if these vehicles emit more CO2, over and above the respective limit, that makes a new calculation necessary.”

“I assume that a solution will be found that doesn’t burden VW customers,” Dobrindt said. “I think that VW clearly has a duty and a responsibility to ensure that, regarding these questions, customers face neither extra costs nor effort.”

Dobrindt said of the 800,000 vehicles found to have excessive CO2 emissions, 98,000 had gasoline engines. So far, the scandal had only affected diesel engines.

“Both the actions that led to these results and the results themselves are unacceptable,” Dobrindt told lawmakers. “And so Volkswagen clearly bears the responsibility and the duty to remedy the damage that has resulted, particularly for customers.”

“If they want to win back trust, they must first ensure that the damage is remedied and the customers don’t get stuck with the problem,” he said.

The latest revelation follows U.S. allegations made public Monday that the cheating software was also found in some cars with larger engines, including Volkswagen’s elite Porsche brand.

CEO Matthias Mueller has promised the company will “relentlessly and completely clarify the matter.” He has said the company must re-examine its corporate culture to prevent such missteps from occurring again.

The news that Porsche vehicles might also have had the deceptive software is a potential embarrassment for Mueller, who headed Porsche before he became CEO.

Mueller has said that upper management would not have involved itself in the details of software development and has pointed to “a few” employees who altered the software code. The company has hired law firm Jones Day to investigate.