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Edward Niedermeyer

VW's Nightmare: Scandal Spreads to Europe

Lax emissions tests create a gray area on cheating and cutting corners.
How long will he be at the wheel?

How long will he be at the wheel?

Photographer: Krisztian Bocsi/Bloomberg

Just days after General Motors settled with federal prosecutors for its deadly negligence over faulty ignition switches, Volkswagen has admitted that it cheated for years on U.S. Environmental Protection Agency emissions tests. Having built its brand in the U.S. around diesel technology, VW faces severe damage to its reputation here, along with billions in EPA fines and now a federal criminal investigation. Worse for consumers, there's no guarantee that the fallout of this scandal will be limited to VW alone. 

Clearly, shareholders are spooked: No amount of damage to VW's relatively weak U.S. market position could justify the huge declines in VW's stock price (near 23 percent on the day, for a market-value hit of $17.6 billion). The fear, almost certainly, is that this scandal could end up affecting VW's European market dominance, which is also highly dependent on diesel sales. Having to bring its entire EU fleet into compliance could cost orders of magnitude more than U.S. market repairs, as well as the firm's widely-respected chief executive officer, Martin Winterkorn, his job.