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VW to face criminal investigation in US and further scrutiny in S. Korea

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Image 0The US Department of Justice has launched a criminal investigation into Volkswagen after the carmaker admitted to violating environmental standards. The probe comes in addition to previous fines.

News of the Justice Department's criminal probe has piled more pressure on Volkswagen (VW) - the world's largest automaker by sales in the first half of this year.

According to the US authorities, VW admitted that it had equipped about 482,000 cars in the US with sophisticated software to circumvent environmental guidelines.

On Friday, US authorities announced that Volkswagen had fitted its recent four-cylinder VW and Audi diesel car models in the US with software called a "defeat device" that covertly turns off pollution controls when the car is being driven and turns them on only when it detects that the car is undergoing an emissions test.

With the device off, a car could spew health-threatening pollutant gases into the air, including nitrogen oxide in amounts as much as 40 percent higher than permissible emissions standards, said the US Environmental Protection Agency (EPA).

The violations could cost VW $18 billion (16 billion euros) in fines, in addition to recalls and repairs. The company was already hit by a crippling decline in its stock value on Monday, as its shares plunged 18.19 percent to 133 euros ($148.80).

South Korea launches own probe

On Tuesday, Reuters news agency reported that South Korea was launching its own investigation into VW and Audi emissions after Volkswagen's weekend admission in the US. South Korea's Yonhap news agency confirmed the news.

If problems were to be found, South Korea's Environment Ministry said its probe could be expanded to all German diesel imports, which have surged in popularity in recent years in a market long dominated by local producers led by Hyundai Motor.

German car sales in South Korea have soared since a 2011 free-trade deal eliminated duties on vehicles imported from Europe. Diesel models accounted for 68 percent of all cars imported into the country in the first half of 2015.

The South Korean probe would involve 4,000 to 5,000 vehicles, covering VW Jetta and Golf models and sister company Audi's A3 produced in 2014 and 2015, a deputy director at South Korea's Environment Ministry told Reuters.

Suh Sung-moon, an analyst at Korea Investment & Securities, said the scandal would hurt South Korean demand for Volkswagen and Audi cars and benefit local brands such as Hyundai and sister firm Kia Motors.

"South Korean consumers are very sensitive to news, and this emission news will have an impact on the import market," he told Reuters.

Confidence and hesitation

German Economy Minister Sigmar Gabriel meanwhile expressed confidence that VW would clear up the matter quickly and thoroughly. Speaking on Monday, he insisted that the reputation of "Made in Germany" technology would not be tarnished.

But Stefan Bratzel, director at the Center for Automotive Management research group, told AFP that the damage to VW's image would be as great as the financial fines.]

Source: On photo: Volkswagen CEO Martin Winterkorn is expected to shed light on recent events at a supervisory board meeting on Wednesday

September 22 2015, 09:52

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