Major names in the auto industry found themselves caught in headlights of a global engine-rigging scandal on Friday as Volkswagen booked one of the biggest losses in its history over the scam.
As VW announced it was setting aside 16.2 billion euros to cover the costs of the scandal, the German government revealed that an emissions probe found that 16 major car brands -- ranging from France’s Renault to Italy’s Fiat to Japan’s Nissan -- showed up irregularities.
German carmakers would have to recall Audi, Mercedes, Opel, Porsche and Volkswagen vehicles in Europe after failing the test, Transport Minister Alexander Dobrindt said, adding that Berlin was unable to require foreign car makers that did not fall under its jurisdiction to take similar action.
The latest revelations amounted to another aftershock rocking the automobile sector, already vulnerable after VW’s scandal erupted in September with the admission that the group had installed so-called “defeat devices” aimed at cheating emissions tests into 11 million diesel engines worldwide.
This week, the pain spread to Asia, where Japan’s Mitsubishi Motors confessed that it cheated on fuel-efficiency tests.
And late Thursday, top of the range German maker Daimler announced that it was launching an internal probe into its emission certification process at the request of the US authorities.
France’s biggest automaker PSA Group was also not spared, as the country’s anti-fraud squad raided its premises as part of a government probe into emissions after “anomalies” were found in three vehicles.
16 car brands hit
The latest trouble to hit the sector arises from a probe carried out into the emission values of all vehicle models on German roads.
Of 53 models tested, 22 models were found to emit high nitrogen oxide values and possess a technical device that raised questions.
The models in particular have devices that, under specific temperatures, switch off systems that are meant to remove harmful nitrogen oxide from cars’ exhaust.
The systems for cleaning pollutants are deactivated at low temperatures to protect motors or prevent a possible accident, as is allowed by EU regulations, but it was not clear whether some makers used this provision to bend the rules.
Dobrindt said that besides German brands Volkswagen, Audi, Mercedes, Opel and Porsche, as well as France’s Renault, “other manufacturers (affected) are ... Alfa Romeo, Chevrolet, Dacia, Fiat, Hyundai, Jaguar, Jeep, Land Rover, Nissan and Suzuki.”
Meanwhile, independent of the German probe, Daimler -- owner of Mercedes-Benz, announced that it was launching an internal investigation, “into its certification process related to exhaust emissions in the United States upon the request of the US Department of Justice (DOJ).”
Daimler pledged to “investigate possible indications of irregularities and of course take all necessary actions,” it said as its shares went into a tailspin on the Frankfurt stock exchange.
In Asia, Japan’s transport ministry sent officials to raid a Mitsubishi Motors research and development centre for a second day on Friday.
Mitsubishi said it would halt production and sales of the affected models -- mini-cars sold in Japan including many made for rival Nissan -- and warned that the number would likely rise, as it looks to vehicles sold overseas.
VW skids deep into red
For its part, VW said it sank into a loss of 1.582 billion euros in 2015, due mainly to the 16.2 billion euros in provisions it has been forced to set aside to cover regulatory fines, lawsuits and recall costs of the scandal.
“The emissions issue significantly impacted Volkswagen’s finances,” said Matthias Mueller, group chief executive.
VW had only just reached an agreement with US regulators -- who had first broken the scandal -- to offer US owners of some 480,000 illegally polluting diesel cars options of “substantial compensation” and to fix the cars, or to buy them back.
The German giant had faced a court deadline for solutions to the emissions scandal and San Francisco district court judge Charles Breyer said the agreement in principle would give owners of its 2.0 liter diesel cars choices for compensation which also included cancelling the contracts for those under lease.
The offer, which will likely cost Volkswagen billions of dollars, also included the creation of a fund for environmental protection, the company said at a court hearing.
Details of the proposal between Volkswagen USA, the Department of Justice and the Environmental Protection Agency were not immediately released.
But it appeared to be enough to allow Volkswagen to avert a huge trial over how it would deal with the scandal that has already deeply damaged the company.
The so-called “dieselgate” scandal led to the departure of VW’s chief executive Martin Winterkorn.
The German giant, which has abandoned its ambitions of becoming the world’s biggest carmaker ahead of Toyota in the wake of the scandal, has already started recalling some eight million vehicles affected in Europe.
The scandal has greatly tarnished the reputation of a company once regarded as a paragon of German industry.
The recall operation in Europe is expected to take all year. And while VW is footing the bill, it is not expecting to have to pay European owners compensation, much to the chagrin of consumer protection groups.