As the old adage goes: cheaters never prosper.

In the case of Volkswagen and their sister company Audi, cheating has proven to be extremely costly.

ADVERTISEMENT

Yesterday, VW admitted that emissions results for their 2.0l TDI (diesel) engine had been intentionally rigged to pass emission standards.  Apparently, software in the engines detects when the car is being tested and automatically implements emissions controls.  Once the test is complete, emissions controls are removed for day to day driving.  Reports suggest this causes the diesels to fail maximum Nitrus Oxide limits by as much as 40 fold.

News of the admission has spread globally with both European and North American governments demanding new testing of the affected TDI vehicles.  Volkswagen Canada has issued a voluntary stop sell on all TDIs until they sort out what to do.  Volkswagen’s various CEOs have all come forward with apologies, each in turn calling it a mistake and promising corrective action.  This corrective action could prove costly.  11 million vehicles, produced from 2009-2015, are affected.  Some owners are pushing Volkswagen to issue a buy back on the affected vehicles.  Volkswagen themselves still currently has no plan to address the issue.

While the financial toll of these actions has yet to be seen, Volkswagen could face a fine of up to $37,000 USD per car, or $18 billion USD.  This is above and beyond the cost of re-engineering the TDI engine and/or buying back existing vehicles.  Volkswagen stock has already lost billions in value, plunging over 40% in just two days, and have already said they will be putting aside $7.3 billion USD in the next quarter to deal with the issue.  It’s a big number, but it may be minuscule to the actual cost they face in the end.