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Here’s What You Should Know About Volkswagen’s Multi-Billion Dollar Scam

Volkswagen has found itself in some muddy waters. The German auto giant has been caught in a scandal so big it could be the company’s end as we know it. The company revealed on Tuesday that around 11 million diesel cars worldwide are equipped with devices that can cheat pollution tests. The cars’ pollution controls only worked when being checked by regulators.

This exposé led to a plummeting of shares that initially dropped around 17% on Monday and another 20% the next day. The company lost nearly 1/5th of its market cap and is currently at a low of 105.65 euros. While the company tries to recover, the US government is mulling criminal charges as well.

Volkswagen Shares

The Company CEO, Martin Winterkorn, apologized for the scandal and has stated that the company is launching an external probe into the matter.

“Further internal investigations have shown that the software concerned is also installed in other diesel vehicles,” VW said in a statement adding that, “anomalies have shown up in around 11 million cars worldwide that are equipped with a specific engine type”.

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Furthermore, the company is planning to set aside 6.5 billion euros in the third quarter to cover the necessary services and to win back the customer confidence. The company has admitted that it has fitted around 482,000 cars in the United States with devices that can cheat pollution tests, covertly turning off the check when being driven and turning it on when undergoing pollution tests.

The German company halted sales in the US during the investigation, which could lead to fines of more than $18 billion levied by the Environmental Protection Agency.

Volkswagen Pollution

Diesel engines are far more fuel economical than gasoline, and have been popular in Europe for a long time. But there’s a catch to diesel engines. While diesel cars get better mileage and emit fewer carbon-dioxide, they, however, emit more nitrogen oxides (NOx), which is the cause of smog, and other particulates that can be damaging to the lungs. Europe has been able to deal with this by imposing looser emission standards. But the United States are more strict when it comes to the emission of these pollutants since the 1970s, which is why diesel cars have not caught on widely.

However, with diesel technology gradually getting cleaner through a combination of lower-sulfur fuel, advanced engines, and new emission-control technology, the US has eased its laws and automakers are showing more interest in “clean-diesel” cars. Since 2009, Volkswagen has sold more than 482,000 clean diesel cars in the US. And as it turns out, Volkswagen had been lying about the “clean-diesel” aspect.

VW could not achieve an ideal mix of performance, fuel efficiency, and low pollution, so it cheated its way out. So far VW is the only company caught in the scandal. The EPA said on Monday that it will investigate other diesel car manufacturers as well.

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You might wonder how VW was able to turn on and turn off the car’s pollution control at the right time. Well, the company had been inserting codes in its vehicles software that tracked the car’s pedal movements and steering. So when the car suggested that it was being tested for pollution, the car automatically turned its pollution control on, while the rest of the time the pollution control was switched off. One wouldn’t suspect an auto maker as big as Volkswagen to stoop so low.

The company’s next move might be to recall the cars and fixing the tampered device. No information has been revealed yet. We’ll bring you more details on the scandal as it progresses.



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