Problems caused by Volkswagen diesel emissions scandal expand

The fallout from Volkswagen’s emissions-cheating scandal intensified Wednesday, as investors dumped the company’s stock and a credit rating firm downgraded its debt. European regulators demanded that VW speed up its investigation into the cheating, while the company halted sales of seven models in the U.S. that allegedly were part of the plot.

The latest developments followed Volkswagen’s admission Tuesday that it had understated the carbon dioxide emissions for 800,000 cars, widening the scope of the scandal.

The company has been unable to halt the flow of bad news since mid-September, when the U.S. Environmental Protection Agency said Volkswagen had installed software on 482,000 cars with small diesel engines that enabled them to cheat on emissions tests for one pollutant, nitrogen oxide. The software reduced emissions when the car was on a test stand. Volkswagen acknowledged that 11 million vehicles worldwide have the software.

On Monday, the EPA charged that Volkswagen also used cheating software in some cars with larger diesel engines, including Volkswagen’s elite Porsche brand. Volkswagen denied the allegation, but over the last two days the automaker halted sales in the U.S. and Canada of the models involved: the Volkswagen Touareg, Porsche Cayenne and the Audi A6, A7, A8, Q5 and Q7.

VW said it had also found “unexplained inconsistencies” in emissions from some of its vehicles of carbon dioxide, a gas that scientists say contributes to global warming.

The cars were sold under the Volkswagen, Audi, SEAT and Skoda brands, most of them in Europe and none in the United States. Involved were 1.4-, 1.6- and 2.0-liter diesel engines and a 1.4-liter gasoline engine with fuel-saving cylinder deactivation technology.

The company said the carbon dioxide problem could cost it 2 billion euros ($2.2 billion), on top of 6.7 billion euros it had already set aside to cover the costs of recalls. Analysts say the total costs in fines and lost sales could be several times that. Amid concerns over the escalating costs, the German carmaker’s shares slid $10.55, or 9.5%, to $100.45 on Wednesday.

The widening scandal also prompted Moody’s Investors Service to cut the rating on Volkswagen’s debt, which could make borrowing money more expensive for the company. The firm cited “mounting risks to Volkswagen’s reputation and future earnings” from this week’s new developments.

The European Union’s executive commission told Volkswagen to speed up its investigation, which is being led by law firm Jones Day.

“Public trust is at stake here,” spokeswoman Lucia Caudet said Wednesday.

The commission has enforcement powers to ensure that manufacturers respect their obligations in terms of carbon dioxide emissions, including the possibility of imposing fines.

Germany’s transport minister indicated that VW would be on the hook for the costs of higher car taxes after the revelation that carbon dioxide emissions were understated.