By Simon Morgan
German auto giant Volkswagen has plummeted nearly 20 percent on the stock market amid revelations that hundreds of thousands of its diesel cars have software that secretly thwarts US emissions tests.
Volkswagen, the world's largest carmaker by sales in the first half of this year, on Monday (local time) said it had halted all diesel vehicle sales in the United States during a probe into the scandal, which could lead to fines of more than US$18 billion (NZ$28 billion).
It is not known how far the manipulation extended
In Germany, the government launched an investigation into whether Volkswagen or other car makers are doing anything similar in Germany or Europe.
South Korea's Yonhap news agency said the authorities there, too, will conduct emissions tests on three Volkswagen car models in mid-October to check for similar deception.
Beyond the fines and lawsuits, and the billions of euros that evaporated in Volkswagen's stock market value as it plunged 18 percent to 132.30 euros in mid-afternoon trade in Frankfurt, the company faces a potentially crippling blow to its reputation.
According to the US, VW equipped 482,000 cars in the US with sophisticated software that discretely turns off emissions controls when driving normally and secretly turns them on only when it detects that the car is undergoing an emissions test.
This allows the car to pass the emissions test, earning a certificate of good environmental performance.
Once the test is over, the mechanism de-activates itself, releasing pollutant gases into the air, such as nitrogen oxides that are linked to severe respiratory ailments including asthma.
"Using a defeat device in cars to evade clean air standards is illegal and a threat to public health," said Cynthia Giles, enforcement officer at the US Environment Protection Agency (EPA), describing the allegations as "very serious matters".
VW chief executive Martin Winterkorn issued an apology on Sunday.
"The board of management takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will co-operate fully with the responsible agencies, with transparency and urgency, to clearly, openly and completely establish all of the facts of this case," Winterkorn said.