Diesel-hacking Scandal Sends Volkswagen Reeling

Company’s stock drops 20% as a nationwide TDI recall looms.

In what may well turn out to be the most destructive scandal in the history of the automotive industry, Volkswagen has announced that it is halting sales of its diesel cars and launching an investigation that could bring down the top brass of the world’s largest automaker by sales volume.

VW CEO Martin Winterkorn said in a brief statement over the weekend that he was “personally am deeply sorry that we have broken the trust of our customers,” and that the company would “do everything necessary in order to reverse the damage this has caused.”

The EPA announced on Friday that it discovered the automaker using illegally installed software in its four-cylinder TDI engines to evade smog standards. The software was designed to conceal the cars’ emission of the nitrogen oxide, one of the more potent causes of smog, as well as asthma, lung cancer, a variety of respiratory diseases and, well, death.

VW could face civil penalties of $37,500 for each vehicle not in compliance with federal clean air rules. Some 482,000 four-cylinder VW and Audi diesel cars sold since 2008 are involved in the allegations. The breadth of the revelations has sent Volkswagen’s stock down as much as 23% September 21st.

What did VW stand to benefit from setting a smokescreen for the regulators? For starters, more horsepower and more torque. What can it stand to lose? That remains to be seen.