UK calls for probe into VW scandal as Merkel seeks 'transparency' - as it happened
German automaker admits 11 million cars affected by emissions scandal, and sets aside a6.5bn to cover the costs
- UK transport secretary: Urgent investigation needed
- Merkel calls for 'full transparency'
- Die Welt: Company's future could be at risk
- VW: 11m cars affected worldwide
- Volkswagen shares slump after profits warning
- Chief executive apologises but does not resign
- Q&A: Volkswagen scandal explained
6.22pm BST
VW chief executive Martin Winterkorn has not resigned despite the pressure on him after the emissions scandal, but his fate will be decided when the car maker's board meet on Wednesday.
And as we reported earlier, workers representatives on the supervisory board are keen that there are "personnel consequences" and not just among the rank and file. So despite his profuse apologies, Winterkorn may yet be one of those "consequences."
5.47pm BST
US state attorneys general are forming a committee to probe Volkswagen over the emmissions scandal, Reuters reports quoting the New York attorney general Eric Schneiderman.
5.35pm BST
Away from VW for the moment, and over in Greece it looks like former finance minister Euclid Tsakalotos will take that post in the new cabinet, set to be announced later, despite suggestions earlier he may have been reluctant. Helena Smith reports:
The Oxford-educated academic will head the ministry; Giorgos Stathakis who was also at the national economy ministry will return to his post. But perhaps the toughest job will fall to another British-trained academic, the current interim finance minister Giorgos Houliarakis. Houliarakis will be elevated to the top post of a new ministry created with the express purpose of coordinating all the government departments that will be enforcing the internationally mandated fiscal consolidation policies and structural reforms.
The state-run TV channel said at least six other ministers would return to their previous posts, including the foreign minister Nikos Kotzias, the health minister Panagiotis Kouromblis, the justice minister Nikos Paraskeuopoulos and Panos Kammenos who is also head of the leftists' junior partner in government, the small right-wing, nationalist Independent Greeks party.
5.03pm BST
Volkswagen shares have closed down 19.82% at a106, meaning some a26bn or so has been wiped off the value of the German carmaker this week.
The weakness in the motor sector came as investors feared the emissions scandal could spread beyond VW, and was one factor in a worldwide market slump.
4.54pm BST
Professor David Bailey of Aston Business School says it is "seriously dumb" to try and cheat a regulator and discusses whether Volkswagen could also be cheating in Europe:
4.42pm BST
Here's Winterkorn's statement, courtesy of Die Welt and Google Translate:
"Ladies and gentlemen, the irregularities in diesel engines of our group contradict everything which Volkswagen stands for. Also I have not yet got the answers to all these questions at the moment. But we are about to uncover the background relentlessly. In addition at this time we will put everything on the table - as quickly, thoroughly and transparently as possible. And we will continue to work closely with the relevant state agencies and authorities. This quick and comprehensive information is a top priority. We owe that to our customers, our employees and the public. And to put it bluntly: manipulation at Volkswagen must never happen again.
Ladies and gentlemen, many millions of people around the world trust our brands, our cars and our technologies. I'm so sorry that we have broken this trust. I apologize to our customers... and the general public for the misconduct. Please believe me, we will do everything possible to make amends for any damage. And we will do everything to regain your confidence step by step.
4.00pm BST
Winterkorn said he was sorry "we betrayed the trust" of millions of people. He added: "Swift and comprehensive clarification has now the utmost priority. To make it very clear: manipulation at VW must never happen again."
3.50pm BST
VW chief executive Martin Winterkorn has apologised for the company's misconduct, in his video statement which is now on the company's website.
But it appears he intends to fight to keep his job.
Most important takeaway from #VW Winterkorn statement: He's going to fight for his CEO job. What's unclear: If he'll win. Next 48 hrs key.
3.40pm BST
Workers' representatives on Volkswagen's supervisory board will push for management changes after the emissions scandal, council chief Bernd Osterloh told employees.
In a letter obtained by German newspaper Bild and reported by Reuters, he said:
I can assure you that we will do everything possible in the supervisory board meetings this week to ensure the matter is cleared up quickly and that personnel consequences are drawn. And that will not just affect the rank and file, I can assure you.
3.27pm BST
Germany's transport ministry is sending a fact-finding committee to Volkswagen this week to investigate the emissions scandal, Reuters is reporting. In a statement the ministry said:
Our committee will examine whether the vehicles in question were built and tested according to Germany and European rules, and whether that was done in accordance with vehicle registrations.
3.18pm BST
Volkswagen has said it will post a video statement by chief executive Martin Winterkorn on its website at 15.00 GMT (16.00 BST).
Earlier the company denied reports he would be replaced by Porsche's Matthias Mi1/4ller.
3.13pm BST
Eurozone consumer confidence has come in worse than expected for September at 7.1, compared to the 6.8 than analysts had been forecasting.
And that is even before the Volkswagen scandal had emerged.
2.57pm BST
US markets have joined in the general rout, with falling commodity prices and the VW scandal sending investors heading for the exits.
The Dow Jones Industrial Average has dropped more than 200 points in early trading.
2.48pm BST
UK Transport Secretary, Patrick McLoughlin, has confirmed that he's calling for an EU-wide investigation.
"We are closely monitoring the situation and have been pushing for action at a European level for more accurate tests that reflect driving on the road.
It's vital that the public has confidence in vehicle emissions tests and I am calling for the European Commission to investigate this issue as a matter of urgency."
"Investigations are ongoing within Volkswagen as well as in the U.S. and in Germany.
Therefore, it is premature to comment on whether any specific immediate surveillance measures are also necessary in Europe and whether vehicles sold by Volkswagen inEurope are also affected.
EU says 'we need to get to the bottom' of VW scandal -- but holds off on probe into bloc's biggest carmaker & pillar of its largest economy
2.44pm BST
The fallout from the VW scandal continues. Johnson Matthey, which makes catalytic converters, has fallen nearly 7%, while US-Italian carmaker Fiat Chrysler has said it does not use any defeat devices in its vehicles.
Fiat Chrysler says it is working closely with the US authorities to make sure its vehicles are compliant with the appropriate requirements.
2.44pm BST
@GrahamtRuddick It's a hat-trick with their 25% stake in SBRY
Volkswagen is currently down nearly 19%, mining group Glencore is down 12% at 104p and well below the 125p level of last week's fundraising as the commodity sell-off continues. And Sainsbury is 0.5% lower.
2.43pm BST
The economics editor of German newspaper Die Welt has warned that Volkswagen is now under attack from all sides, and asked whether the emissions crisis could bring down the company.
Nikolaus Doll says that the scandal has reached a dimension that could threaten the existence of the automaker, given the costs and penalties ahead.
Feeling in Germany that emissions scandal could threaten existence of #Volkswagen via @welt http://t.co/fawr1qudZ4
2.39pm BST
Here's a quick recap of how the crisis gripping Volkswagen has deepened today.
Related: VW scandal: carmaker admits 11m vehicles are involved
2.09pm BST
Angela Merkel has demanded full answers to what went wrong at the country's largest carmaker.
"Given the difficult situation, this is about showing complete transparency, clearing up the entire case.
The Transport Minister is in close contact with the company, Volkswagen. And I hope that the facts will be put on the table as quickly as possible."
2.05pm BST
This Reuters graphic explains how VW's software detected whether a car was being tested, and changed the level of nitrogen oxide gases pumped out.
How VW's "defeat device" works http://t.co/KBcL4VOSKj #dieselgate @reuterspictures pic.twitter.com/67h2UZl5fA
1.42pm BST
Bernstein's Max Warburton also believes that Volkswagen management changes are inevitable.
Any attempt to pin the blame on junior staff will flounder, he says. The buck must stop with CEO Martin Winterkorn.
VW's press release and comments since have suggested they may end up trying to blame someone at the operational and engineering level - all this talk of "not tolerating" this behaviour and hiring external investigators suggests as much.
Perhaps it is credible that some engineers came up with a solution and senior management was not aware of it. VW has over 450,000 employees - it's not possible to track their actions closely. I have enough trouble tracking what my small team of associates is up to. I've no idea what my kids are up to right now (it may involve writing computer code too).
Winterkorn's personal brand has been built on being "the engineer's engineer" and the "detail main". There are wonderful stories of him personally pulling apart the gearbox of an Audi car at Le Mans after it broke and figuring out personally what went wrong (source: Allan McNish, racing driver). We are not talking about the CEO of a French OEM, schooled at ENA. We are not talking about a US executive with an MBA and great smile.
This is an engineer, who theoretically should have asked questions about how VW suddenly improved its NOx emissions to meet Californian standards. But then we probably should have asked the question too"
1.31pm BST
City firm Bernstein has predicted that the Volkswagen crisis will end the era of diesel cars in Europe.
Analyst Max Warburton argues that European regulators had already begun to backtrack after promoting diesel in the 1990s. This week's revelations will spur them on.
Future emissions standards in Europe were already set to tighten the rules on NOx and particulate emissions and even though diesel could theoretically hit these standards, the costs of compliance (due to additional hardware and tech) was going to make diesel uncompetitive in small cars with low price points.
The move against VW is going to act as a catalyst to speed up the fall in diesel market share in Europe and halt it in the US. In fact, regulators will now be much more conservative about what they permit and much tougher real world tests may prove either too difficult - or too expensive - for diesel to meet.
1.19pm BST
Volkswagen's denial is short and to the point.
Over to Reuters:
Volkswagen denied a media report that said Chief Executive Martin Winterkorn was to be replaced amid an emissions scandal that has rocked the company.
"Nonsense," a spokesman at the company's headquarters in Wolfsburg said on Tuesday when asked whether the report byGerman Tagesspiegel was true.
1.16pm BST
The UK government is pushing for a full European inquiry into vehicle emissions, reports the BBC's business editor Kamal Ahmed.
Breaking: am being told Department for Transport to demand a European Commission EU-wide inquiry in VW emissions scandal
1.08pm BST
A Volkswagen spokesperson has denied that CEO Martin Winterkorn is about to be replaced by Porsche's Matthias Mi1/4ller.
Volkswagen spokesman says they reports that CEO is to replaced with Porsche CEO Mueller are ridiculous: Rtrs
1.00pm BST
German newspaper Tagesspiegel is reporting that Volkswagen boss Martin Winterkorn will be replaced at Friday's board meeting.
Their sources say he will be succeeded by Porsche CEO Matthias Mi1/4ller, with Winterkorn paying the price for VW using illicit software to trick regulators.
From Agencies: Volkswagen CEO Winterkorn To Be Replaced By Porsche CEO Mueller
NEWSFLASH - Vw Ceo Winterkorn To Be Replaced By Matthias Mueller Reports
12.46pm BST
Speculation is growing that this scandal could potentially bring down Volkswagen's CEO, Martin Winterkorn.
Volkswagen board is due to meet on Friday will decide whether to extend Winterkorn's contract until end-2018.
"I am sure that there will be personnel consequences in the end, there is no question about it".
German press reporting #Volkswagen CEO Winterkorn to be replaced this Friday. $VOW RO
12.38pm BST
Volkswagen's shares are slumping because there is no precedent for such a scandal, says Peter Garnry, head of equity strategy at Saxo Bank.
Emissions rigging is a new area, so investors don't know how badly VW could be penalised. It's not like a financial scandal, where there's a well-trodden path to the regulators' door.
If an automaker violates the Clean Air Act it costs $37,500 per vehicle. Given the number of diesel cars sold [in the US] , this brings the potential fine to $20 billion. However news out this morning states that other governments such as Australia will now look into the matter and see if their emission standards have been violated by Volkswagen.
In plain language, this may not be an isolated case so the tail risk is just much bigger.
12.26pm BST
Shares in the major European carmakers have all fallen today.
VW is leading the fallers on the German DAX index, followed by Daimler and BMW.
12.13pm BST
Volkswagen has revealed for the first time today that 11 million vehicles were fitted with software that tricked regulators into under-recording noxious emissions.
Before today, VW has admitted to fitting half a million diesel cars with the code -- something the FT called a 'monumental blunder'.
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.
12.02pm BST
The Economist argues that Volkswagen was already struggling, before being shunted by the revelations surrounding emission tests.
Investors have also been spooked by its other problems, which the latest scandal have made worse, it says:
VW has been aiming to build more than 10m cars a year, in order to take advantage of the big economies of scale that exist in the industry. But its efforts to grow appear to have faltered. Its market share in America-which at 2.2% last year is less than Subaru's-is now shrinking, along with its turnover in China.
Even the sales it is making are not particularly profitable.
Why Volkswagen's share price has fallen by another 23% this morning http://t.co/LikeAtUZBm pic.twitter.com/RxnOSSmaEb
11.58am BST
A string of commentators are suggesting that the emissions scandal could be the auto equivalent of the interest rate-fixing perpetrated by the banking sector.
.@OlafStorbeck "This has the potential to be the Automotive industry's #Libor" #Volkswagen
VW emissions test crisis could end up as the car industry's LIBOR scandal. Expect this one to run and run. Tesla must be pleased?
11.47am BST
The cost of insuring Volkswagen's corporate debt against default has jumped this today.
That indicates concerns that the scandal could cause extremely serious damage:
Left left hard left formation, VW CDS. http://t.co/bMPa55PXq3 pic.twitter.com/3HzlcKJZZ9
11.45am BST
The Society of Motor Manufacturers and Traders (SMMT) has insisted there was no evidence that manufacturers in the UK attempt to mislead emission testers.
The trade association's chief executive, Mike Hawes, said (via PA).
The EU operates a fundamentally different system to the US - with all European tests performed in strict conditions as required by EU law and witnessed by a government-appointed independent approval agency.
"There is no evidence that manufacturers cheat the cycle. Vehicles are removed from the production line randomly and must be standard production models, certified by the relevant authority - the UK body being the Vehicle Certification Agency, which is responsible to the Department for Transport.
11.40am BST
11.35am BST
By my reckoning, around a28bn has been wiped off the value of Volkswagen this week.
Shares were trading at a162 each on Friday afternoon, valuing the company at a78.5bn.
11.31am BST
Campaign group Transport & Environment (T&E) has warned that millions of diesel cars could be recalled, if the practice of fiddling emission tests is widespread.
T&E's diesel expert Jos Dings has called for EU regulators to "take their job seriously", and examine if cars on the road are pumping out more harmful emissions than is tolerable.
All the evidence points to exactly the same thing going on in Europe and potentially even worse.
"Diesel cars in Europe operate with worse technology on average than the US.
11.23am BST
The escalating crisis at Volkswagen is sending shivers through the Frankfurt stock market, where the DAX index has lost 2.7%.
The scandal risks denting the reputation of Germany's manufacturing sector, warns political writer Andrew Lilico.
This VW thing cld damage the whole German manufacturing brand. It's potentially a kind of DasLIBOR.
11.17am BST
Liberal Democrat MEP Catherine Bearder has warned that European regulators are failing to enforce emission standards.
Bearder says:
"Manufacturers in the US have been caught out, but we know that pollution limits are also being breached in Europe.
"We need to tighten EU emission standards and make sure they are properly enforced. Unless we take action, thousands of lives will continue to be tragically cut short by air pollution."
11.12am BST
Volkswagen has also revealed that around 11 million diesel vehicles worldwide were fitted with the software at the centre of the US emissions scandal.
It also pledged to work "intensely to eliminate these deviations through technical measures."
11.02am BST
Wow. VW shares have crashed by another 20% today, as traders digest this profits warning.
An iconic German brand: -20.1% pic.twitter.com/SJKAvN6njD
10.55am BST
Breaking news: Volkswagen has just announced that it will set aside a6.5bn to cover the costs of the investigation into how its diesel cars cheated emission tests, sending its shares slumping.
The move will make a significant hit in its earnings this quarter, as the German carmaker wrestles with the impact of the scandal.
BREAKING: #Volkswagen sets aside a6.5 billion ($7.3 billion) to pay for emissions crisis http://t.co/PlNPWciAZV
#Volkswagen shares down by almost 10% as company to set aside a6.5bn provision in 3Q for Diesel remedies. pic.twitter.com/XcS2UFbHFN
10.35am BST
Over in Greece, state run TV has just announced that prime minister Alexis Tsipras' new cabinet will be sworn in Wednesday morning, our correspondent Helena Smith reports.
10.33am BST
Being Greece's finance minister is one of the roughest jobs in European politics, so we can't blame Euclid Tsakalotos if he turns it down....
No wonder Tsakalotos is reluctant. He probaly lost 10 yrs of his life trying to close deal for #Greece http://t.co/5wsHkc2iAg via @ReutersUK
10.30am BST
Greek media are reporting that Euclid Tsakalotos, is reluctant to become finance minister again.
If Tsakalotos was not appointed finance minister he could still lead negotiations with the eurozone, which has agreed an a86bn ($96 billion) bailout with Greece in exchange for deep economic reforms.
Tsipras's alternative would be Giorgos Houliarakis, who has been finance minister in the caretaker government put in place during Greece's election campaign.
10.28am BST
Britain's slow progress reducing its budget deficit means the UK is vulnerable to economic shocks, warns Ross Campbell, ICAEW Director for Public Sector Policy.
Here's his take on today's figures:
Sorting our public finances depends on robust tax receipts, so it is disappointing to see corporation and income tax revenues decrease. The weakening global economy could also have a significant impact on tax receipts in the coming months, which would only make the situation worse.
10.12am BST
10.11am BST
Back in the eurozone, Italy's prime minister finance minister has waded into UK politica with an attack on Labour's leader, Jeremy Corbyn.
Matteo Renzi has been dubbed Italy's Tony Blair. And he probably spoke for the former PM when he told lawmakers that the MP for Islington North wasn't a winner.
"After what happened with Corbyn, I think [David] Cameron is the happiest of all about Corbyn's win....
"It's not a question of being Blairite or anti-Blairite, it's a matter of 'Do you want to go to elections like you go to the Olympics, to win or to participate'?"
Related: Corbyn election shows Labour's delight in losing, says Italian PM
So, @yanisvaroufakis is baaaack. And he has a message for @matteorenzi http://t.co/jYWMx6dVdk pic.twitter.com/XjmD2TBGA0
10.03am BST
Today's public finance figures also show that Britain is heading towards a deficit of around 70bn this year.
Borrowing illustrated pic.twitter.com/fQDy89Z8WV
9.53am BST
Britain had to borrow 12bn to balance the books in August, around 3bn more than expected. But it's not a reason to panic.
This is the largest monthly deficit since August 2012, due to unusually weak income tax receipts. According to the ONS, more people paid income tax bills in July, so last month suffered a shortfall.
So whilst the year so far has been better for UK borrowing and PSBR the figures for August are disappointing #GBP #Austerity
9.37am BST
France's finance minister has called for a "Europe-wide" probe to address the revelations that Volkswagen evaded US pollution tests.
Michel Sapin told French radio that in order to "reassure" the public, it seemed "necessary" to carry out checks on cars manufactured by other European carmakers.
"We are in a European market, with European rules that need to be respected," Sapin told Europe 1 radio.
9.34am BST
The FTSE 100 index of blue-chip shares has now shed 111 points, as the selloff picks up.
#FTSE below 6000 for the first time in three weeks. TM pic.twitter.com/XMO5xCyZbH
Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H https://t.co/9Z0Aw7aI6h
9.28am BST
Over in Frankfurt, VW's share price has now lost almost 5%.
Other car makers are also leading the DAX fallers, as the revelations that emissions data have been falsified continue to rock the sector.
News that South Korea, as well as the US, would be investigating the company's diesel cars took the stock over 4% lower (and counting) immediately after the bell, pushing VW to a further 3 year low (and continuing to have a nasty knock on effect for majority shareholder Porsche and the rest of the auto-sector).
9.15am BST
A selloff in the mining sector is helping to pull Europe's stock markets down this morning.
The FTSE 100 is leading the selloff, down 1%.
*COAL DROPS BELOW $50 FOR FIRST TIME IN EUROPE AS GLUT PERSISTS pic.twitter.com/0dcaWIbdsj
8.57am BST
Our Q&A explains why the Volkswagen emissions scandal is so serious, and what might happen next:
Related: VW scandal: what the emissions revelations mean
8.37am BST
Volkswagen shares are sliding again, down 3.4% in early trading after slumping by a fifth on Monday.
The selloff comes after the German automaker's US chief executive admitted the company has "totally screwed up" over the emissions scandal that has rocked the automotive industry.
Related: Volkswagen scandal: US chief says carmaker 'totally screwed up'
8.21am BST
George Osborne is now fielding questions about his trip to China, on Radio 4's today programme.
He's defending his decision to build closer ties with Beijing.
Osborne defends govt engaging with China despite worries over human rights
8.13am BST
George Osborne's calming words went down well with Chinese traders. The Shanghai index just closed, up almost 1%.
After @George_Osborne started talking here, the Shanghai stock exchange hit a new intraday high. Just saying pic.twitter.com/rJj04RGTzZ
8.09am BST
UK chancellor George Osborne has called for Britain and China to build a Golden Decade together.
And he used a trip to China's main stock market to do it.
"I very deliberately chose to come here, to the Shanghai Stock Exchange, to the epicentre of the volatility in financial markets this summer, to say this:
"Whatever the headlines, regardless of the challenges, we shouldn't be running away from China."
"Let's stick together and make Britain China's best partner in the West. Let's stick together and create a golden decade for both of our countries."
.@George_Osborne speaking to a huge audience here in Shanghai pic.twitter.com/V2xMmpN9bL
8.01am BST
Alexis Tsipras will keep some familiar faces in the top jobs in his cabinet, predicts the Greek newspaper Kathimerini.
But he may also create some new roles, to help implement the measures he signed up to this summer.
It is expected that Euclid Tsakalotos will continue as finance minister and that Giorgos Stathakis will also keep his role at the Economy Ministry.
However, Tsipras is said to want to create a position at the level of deputy minister that will carry the responsibility for coordinating the government's actions in relation to the demands of the third bailout. It is expected that caretaker finance minister Giorgos Houliarakis, who also led Greece's negotiating team in Brussels over recent months, will take on this role.
7.52am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Having been sworn in as prime minister last night, Alexis Tsipras will be getting to work this morning creating a new cabinet. His eurozone allies are watching closely, to see if the left-winger can now deliver the challenging programme of tax rises and reforms demanded by lenders.
Tsipras must now implement a fiscal consolidation and reform programme that was designed to fail. Illiquid small businesses, with no access to capital markets, have to now pre-pay next year's tax on their projected 2016 profits.
Households will need to fork out outrageous property taxes on non-performing apartments and shops, which they can't even sell. VAT rate hikes will boost VAT evasion.
.@George_Osborne backs China's ambition to be an IMF reserve currency
Euro markets have just opened: $FTSE 6121 up 12 $DAX 9990 up 41 $CAC 4595 up 9 $IBEX 9879 up 23 $MIB 21784 up 28
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