Diesel and VW’s reputation for German engineering were cornerstones of Winterkorn’s effort to catch up in the U.S. market. The violations, which affect nearly half a million vehicles, could result in as much as $18 billion in fines, based on the cost per violation and the number of cars. Criminal prosecution is also possible.

?“If this ends up having been structural fraud, the top management in Wolfsburg may have to bear the consequences,” said Sascha Gommel, a Frankfurt-based analyst for Commerzbank AG, whose share rating is under review.

The Wolfsburg, Germany-based company admitted to fitting some of its U.S. diesel vehicles with software that turns on full pollution controls only when the car is undergoing official emissions testing, the EPA said Friday. Affected are diesel versions of the VW Jetta, Golf, Beetle and Passat and the Audi A3.

Eoin Treacy's view

Governance really is Everything and Volkswagen’s management have engaged in scandalous behaviour. With a vote on Friday whether to renew Winterkorn’s contract it is to be hoped the board decide on putting a fresh pair of hands at the helm. 

The three main German car shares had all declined substantially from this year’s peaks. Part of the reason for these moves was in response to the slowdown in Chinese demand and the rebound in the Euro. According to Bloomberg there were no buy or sell transactions among board members over the last year so the potential for insiders trading on foreknowledge of today’s news is off the table at least for now. 


Both BMW and Daimler have found at least near-term support above their late August lows and reversionary rallies remain underway. 

Volkswagen closed off its low and a lot of bad news has already been priced in. However, the potential for additional allegations of wrong doing elsewhere could weigh on any reversionary rally.