THE ADMISSION by German car giant VW that it has been cheating with emissions tests in the United States had immediate fallout - in two days its share price dropped 31 per cent, shaving $24 billion off its worth.
But the damage to the brand is incalculable.
Just who wasbehind the scandal and who among the company's leadership knew of the scam has yet to be discovered. But it is hard to believe such a sophisticated effort to falsify emissions would be known only to a handful of middle managers.
In the US, where close to 500,000 vehicles are involved, the prospect of costly litigation is very real.
VW New Zealand says no vehicles implicated in the scandal are sold here. It affects vehicles set to US standards - VWs sold in NZ are emissions-tested to European standards. But, it says, customers who have concerns will be offered a free check.
So what happened? According to the Environmental Protection Agency, some cars sold in America had devices in diesel engines that detected when they were being tested. Under laboratory conditions, the device appears to have put the vehicle into a safety mode in which the engine ran below normal power and performance. Once on the road, the engines switched from this mode, emitting nitrogen oxide pollutants up to 40 times the legal level in the US.
VW has pushed diesel cars there with a huge marketing campaign trumpeting low emissions. Now it admits about 11 million cars worldwide have the so-called "defeat device".
Chief executive Martin Winterkorn said his company had "broken the trust of our customers and the public".
This appears to be cynical sleight of hand on a grand scale that will massively damage the company's reputation. And people have every reason to wonder if others have gone to such extreme lengths to cheat.
