Pressure piled on the head of Volkswagen on Monday in the wake of an emissions-testing scandal that's seen around 15 billion euros ($16.9 billion) wiped off the company's market value.
Following revelations that the German carmaker had rigged U.S. emissions tests for about 500,000 diesel cars, VW CEO Martin Winterkorn apologized Sunday for the fact that his company had "broken the trust of our customers and the public."
But saying sorry wasn't enough for investors as they digested the financial and reputational implications of the scandal on the world's biggest carmaker by sales — in mid-afternoon trading in Frankfurt, Volkswagen's share price was down a stunning 17.8 percent at a near three-year low of 132.15 euros. Earlier it had tumbled by more than 20 percent.
In the wake of Friday's revelations from the U.S.'s Environmental Protection Agency, VW has already halted sales of some vehicles in the U.S. and pledged to cooperate with regulators in an investigation that could, in theory, see the company fined up to $18 billion.
Industry analysts said the VW CEO faces difficult questions in the coming days, particularly when the company's board is scheduled to meet Friday.
"At the moment, I'd be surprised if Winterkorn can ride this out, but in Germany there's often a slightly slower process in these matters," said Christian Stadler, a professor of strategic management at Warwick Business School who researches the car industry. Stadler said that if VW were a U.S. company, then the CEO would have gone more or less immediately.
In essence, Volkswagen stands accused of skirting the U.S.'s clean air rules. The EPA said VW used a device programmed to detect when the cars are undergoing official emissions testing. The software device then turns off the emissions controls during normal driving situations, allowing the cars to emit more than the legal limit of pollutants.
Guido Reinking, a German auto expert, said that for a company to engage in such blatant trickery the company's top executives would have to be informed.
Winterkorn, an engineer by training, led research and development across the VW group from 2007. He became chairman of the management board the same year.
"It's almost impossible to imagine that he didn't know about this special way of programming the engine," Reinking told German television station n-tv.
Volkswagen marketed the diesel-powered cars, which account for about 25 percent of sales, as being better for the environment. The cars, which were built in the past seven years, include the Audi A3, VW Jetta, Beetle, Golf and Passat models.
The EPA has ordered VW to fix the cars at its own expense but said car owners do not need to take any immediate action. The EPA insisted that the violations do not pose any safety hazard and said the cars remain legal to drive and sell while Volkswagen comes up with a plan to recall and repair them. However, it said the cars pose a threat to public health.
The EPA also indicated the scale of the fines that could be imposed on VW. It said the carmaker could be hit with up to $37,500 per vehicle for the violations — a total of more than $18 billion. The California Air Resources Board is also investigating.
Volkswagen, which recently edged out Japan's Toyota to become the world's top-selling automaker, has had a difficult year, its share price having fallen from more than 250 euros amid signs of faltering sales in the U.S. and China.
VW's current plight has echoes with Toyota itself. The Japanese automaker recalled 9 million cars between 2009 and 2011 after some of its vehicles experienced unintended acceleration, way more than the half-million or so that VW is having to take back. The cost to Toyota, including fines, was a little more $5 billion, according to Warwick Business School's Stadler.
"To some extent the cheating by Volkswagen seems more blatant, but the numbers are lower and there are no fatalities involved," Stadler said. "This suggests that in the 'heat of the moment' the long-term effect on Volkswagen may be overstated. Sure it will hurt, but maybe not quite as bad as we expect right now."
But a hit to its reputation from the emissions revelations could hamper VW's efforts at a sales rebound in the U.S.
If other regulatory authorities decide VW has a case to answer, then the carmaker faces the potential for even bigger fines.
"The news so far revolves around the U.S. impact, but if European investigators become interested the potential penalties could multiply very quickly," said Chris Beauchamp, senior market analyst at IG.
A spokesman for Germany's environment ministry said that, for now, authorities there were waiting to see how the U.S. investigation develops.
"The auto manufacturers have to work closely with U.S. authorities to comprehensively clarify the matter," Michael Schroeren told reporters in Berlin. "We expect reliable information from the car manufacturers so that (German authorities) can check whether comparable manipulation has happened in Germany or Europe."
Government spokesman Steffen Seibert declined to comment directly on the case, but said Germany's standing as a leader in environmental protection hadn't been harmed.
"Our climate policy stands for itself and I think it's internationally recognized that Germany is one of the drivers on the way to (the international climate summit in) Paris," he said.