German car manufacturer Volkswagen has admitted to cheating on U.S. emissions tests, allocating millions to rectify the problem. Meanwhile, the scandal has expanded, leaving other European carmakers scrambling to deny any wrongdoing. Shares have dropped in the wake of the announcement, due to public fears that other companies were also involved.
The EAMA has declared that “there is no evidence that this is an industry-wide issue.” However, European authorities are calling for broader investigations. Several big auto manufacturers have also released statements in the hopes of assuring their customers that they “don’t have the Volkswagen problem.”
Opel issued a statement saying: “GM and its brands are committed to the robust emissions compliance of all our vehicles.” They went on to state that they “do not have ‘defeat devices’ in vehicles we engineer and manufacture.” BMW chose to not comment specifically on the issue Volkswagen is facing, but has declared they “do not use any software that can influence emissions in a test cycle.”
The scandal has caused Volkswagen stock to plummet, costing shareholders millions. One of the company’s largest stockholders, the oil-producing nation Qatar, is already reporting a loss of nearly $5 billion. A third of the company’s $28.5 billion overall value has vanished. The market closed with Volkswagen shares down 17% on Monday, and down another 17.8% on Tuesday.
Shareholders are losing a lot of money. Investments are likely to suffer even further as the scandal widens. Volkswagen has already issued a profit warning stating that target earnings for this year will not be met.
The emissions issue could also result in a reduction in demand, as Theo Vermaelen suggested. Most major automakers experienced a drop in share prices after the news broke. BMW lost 4%, Peugeot is down 7%, Fiat fell 4.5%, and Renault shed 6%. In addition, these big losses have driven German stock index Dax down by 2.6%.
Volkswagen had a solid reputation for quality engineering and reliability, and has made gallant claims about being more environmentally responsible than other car companies. But now that reputation is tarnished, and it could mean big trouble for the entire German car industry, as well as Germany’s overall economy.