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VW chairman apologizes for diesel emissions manipulation that could cost billions

Following the huge news last week that the EPA had uncovered special software inside diesel-powered Volkswagens sold in the US that could "defeat" emissions testing, making them appear compliant with clean air standards when they actually aren't, Volkswagen chairman of the board Martin Winterkorn seems to be owning up.

This statement was released by Volkswagen on behalf of Winterkorn on Sunday, right in the middle of football and Emmys chatter:

The U.S. Environmental Protection Agency and the California Air Resources Board (EPA and CARB) revealed their findings that while testing diesel cars of the Volkswagen Group they have detected manipulations that violate American environmental standards.

The Board of Management at Volkswagen AG takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter.

We do not and will not tolerate violations of any kind of our internal rules or of the law.

The trust of our customers and the public is and continues to be our most important asset. We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire Board of Management.

In the meantime, affected cars are not being sold until Volkswagen can update the software.

While it's a bog-standard corporate apology, the fact that Winterkorn is apologizing so quickly is notable: there's no hedging, no "we strongly deny the allegations" aspect to it. But at the same time, he gives the statement a third-person flavor that may be setting the stage for him and Volkswagen's board to deny knowledge of the cheat and assign blame to certain individuals or divisions within the company. And to be fair, Volkswagen Group is an enormous, global corporation — it's certainly within the realm of reason that cheating emissions standards is a decision that would be made without Winterkorn's direct approval — but considering the gravity of the allegations, it's very likely that executives will leave by the time the investigation is over, if not sooner.

Winterkorn may be taking a page from GM's playbook, which ended up paying $300 million less in criminal fines for its ignition switch defect debacle than the $1.2 billion levied against Toyota for its unintended acceleration scandal. It's widely believed that CEO Mary Barra's swift contrition and cooperation following her promotion helped GM avoid a larger fine — even though years of bad decisions internally had led to the problems, which have been attributed to over 100 deaths.

In the short term, though, Volkswagen's problems are only going to get worse: it will almost certainly have to recall around a half million cars, which may be unable to meet emissions standards without cheating — and that's just in the United States. Reuters reports that the fines for those vehicles alone could add up to $18 billion, unless VW cuts some kind of deal.