Shares in German carmaker Volkswagen dropped more than twenty per cent after it emerged the company cheated on US air pollution tests for years.
They tumbled as much as 23 per cent to €125.40 (£90.85) in Frankfurt, wiping out £11.3 billion from the company's value.
Cynthia Giles, an enforcement officer at the US Environmental Protection Agency, said on Friday (September 18th) the cars in question "contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test".
The feature, dubbed a "defeat device" by the EPA, masks the true emissions only during testing. When driving, the cars emit as much as 40 times the level of pollutants allowed under clean air rules, she said.
The violations affect nearly half a million vehicles and could result in as much as $37,500 (£24,150) in fines for each vehicle not in compliance with federal clean air rules.
EPA says it has been "deceived"
“If this ends up having been structural fraud, the top management in Wolfsburg may have to bear the consequences,” Sascha Gommel, a Frankfurt-based analyst for Commerzbank AG, told Bloomberg.
The EPA said the carmaker used software for diesel VW and Audi branded cars that deceived regulators measuring toxic emissions.
Chief Executive Martin Winterkorn said yesterday (September 20th) he was "deeply sorry" for the breach of US rules and ordered an external investigation.
"I personally am deeply sorry that we have broken the trust of our customers. Volkswagen has ordered an external investigation of this matter," he said.
Meanwhile, vice chancellor and economy minister Sigmar Gabriel told Reuters he was concerned about the "excellent" reputation of German carmakers, saying Volkswagen's emissions manipulation was a "bad incident".
A source close to the company added that any decision on emissions control mechanisms would have been taken at the group's Wolfsburg headquarters, and not by regional divisions.
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