​Volkswagen apologizes, stops diesel sales in wake of US emissions scandal

German automaker orders its US dealerships to halt sales of affected cars, says that 11 million vehicles are impacted globally.

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Volkswagen has been accused of using illegal software in its TDI diesel cars. Antuan Goodwin/CNET

Volkswagen Group is apologizing after the US Environmental Protection Agency accused the automaker of using illegal software in its TDI diesel cars to skirt US emissions standards.

In a statement over the weekend, Volkswagen Group CEO Dr. Martin Winterkorn said he's "deeply sorry that we have broken the trust of our customers and the public." The German automaker ordered its US Volkswagen and Audi dealerships to halt sales of affected vehicles until a fix can be issued. In a further statement, issued Tuesday morning, VW indicates that 11 million Volkswagen Group autos (which includes Audi, Porsche and other brands) contain the software, and that the company has set aside EUR 6.5b to address costs.

The EPA claims certain VW and Audi vehicles use software that meets clean diesel emissions standards when hooked up to testing equipment but then switches to a dirtier mode when disconnected. This causes the torquey TDIs to actually spew up to 40 times more tailpipe emissions when driven in the real world.

The affected vehicles are 2009-2015 model year Volkswagen Jetta, Beetle and Golf, the 2014-2015 VW Passat, and 2009-2015 Audi A3, totaling roughly 482,000 diesel passenger cars.

CARB and the EPA allege that roughly 482,000 VW and Audi TDI vehicles are in violation of skirting US emissions standards. Antuan Goodwin/CNET

Depending on the outcome of the EPA and CARB's investigations, the automaker could be hit with a maximum possible fine of $37,500 for each of the vehicles in violation, adding up to a possible $18 billion in federal fines.

In the wake of the scandal, Volkswagen's stock dropped by as much as 23 percent, wiping out about $17.6 billion (€15.6 billion) in shareholder value.

Volkswagen Group said it will be cooperating fully with the EPA and the California Air Resource Board in their investigations. The automaker has also ordered its own external investigation into the matter, according to its release. A fix for the issue will likely come in the form of an emissions software update issued at local Volkswagen dealerships and service centers.

Update: Volkswagen has issued a statement indicating that 11 million vehicles contain the illegal code:

Volkswagen is working at full speed to clarify irregularities concerning a particular software used in diesel engines. New vehicles from the Volkswagen Group with EU 6 diesel engines currently available in the European Union comply with legal requirements and environmental standards. The software in question does not affect handling, consumption or emissions. This gives clarity to customers and dealers.Further internal investigations conducted to date have established that the relevant engine management software is also installed in other Volkswagen Group vehicles with diesel engines. For the majority of these engines the software does not have any effect.Discrepancies relate to vehicles with Type EA 189 engines, involving some eleven million vehicles worldwide. A noticeable deviation between bench test results and actual road use was established solely for this type of engine. Volkswagen is working intensely to eliminate these deviations through technical measures. The company is therefore in contact with the relevant authorities and the German Federal Motor Transport Authority (KBA - Kraftfahrtbundesamt).

To cover the necessary service measures and other efforts to win back the trust of our customers, Volkswagen plans to set aside a provision of some 6.5 billion EUR recognized in the profit and loss statement in the third quarter of the current fiscal year. Due to the ongoing investigations the amounts estimated may be subject to revaluation.Earnings targets for the Group for 2015 will be adjusted accordingly.

Volkswagen does not tolerate any kind of violation of laws whatsoever. It is and remains the top priority of the Board of Management to win back lost trust and to avert damage to our customers. The Group will inform the public on the further progress of the investigations constantly and transparently.