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Enviroment scandal : Problems caused by Volkswagen diesel emissions scandal expand

Problems caused by Volkswagen diesel emissions scandal expand.

The fallout from Volkswagen's
emissions-cheating scandal intensified Wednesday, as investors dumped the

company's stock and a credit rating firm downgraded its debt. European

regulators demanded that VW speed up its investigation into the cheating, while

the company halted sales of seven models in the U.S. that allegedly were part of

the plot.

The latest developments followed Volkswagen's admission Tuesday that it had

understated the carbon dioxide emissions for 800,000 cars, widening the scope of

the scandal.

The company has been unable to halt the flow of bad news since mid-September,

when the U.S. Environmental Protection Agency said Volkswagen had installed

software on 482,000 cars with small diesel engines 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. Volkswagen acknowledged that 11

million vehicles worldwide have the software.

On Monday, the EPA charged that Volkswagen also used cheating software in

some cars with larger diesel engines, including Volkswagen's elite Porsche

brand. Volkswagen denied the allegation, but over the last two days the

automaker halted sales in the U.S. and Canada of the models involved: the

Volkswagen Touareg, Porsche Cayenne and the Audi

A6, A7, A8, Q5 and Q7.

VW said 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 billion euros

($2.2 billion), on top of 6.7 billion euros 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. Amid concerns over the escalating costs, the German

carmaker's shares slid $10.55, or 9.5%, to $100.45 on Wednesday.

The widening scandal also prompted Moody's

Investors Service to cut the rating on Volkswagen's debt, which could make

borrowing money more expensive for the company. The firm cited "mounting risks

to Volkswagen's reputation and future earnings" from this week's new

developments.The European

Union's executive commission told Volkswagen to speed up its investigation,

which is being led by law firm Jones Day.

"Public trust is at stake here," spokeswoman Lucia Caudet said Wednesday.

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 would be on the hook for the

costs of higher car taxes after the revelation that carbon dioxide emissions

were understated.
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