The fallout from the diesel emissions cheating scandal at Volkswagen continued today with Martin Winterkorn tendering his resignation as Chief Executive Officer (CEO) even as he took responsibility for what he called “irregularities.”
Winkerkorn’s resignation came just days after Volkswagen admitted that it had manipulated software in some diesel cars in order to produce favorable – and flawed – emissions tests results in the United States. Up to 11 million cars worldwide were fitted with the software including the Audi A3 (2009-15), VW Jetta (2009-15), VW Beetle (2009-15), VW Golf (2009-15) and VW Passat (2012-15).
Dr. Winterkorn, who had been CEO at Volkswagen since 2007, denied that knew about the deception but still stepped down, saying in a statement:
I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.
As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.
Volkswagen needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation.
I have always been driven by my desire to serve this company, especially our customers and employees. Volkswagen has been, is and will always be my life.
The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.
Volkswagen has indicated that it will fully cooperate with any related investigations. That might include additional inquiry from an agency that you wouldn’t expect: the Internal Revenue Service (IRS).
According to an analysis by the L.A. Times, the IRS might have paid out as much as $51 million in tax incentive credits for Volkswagen diesel vehicles based on those flawed emissions tests. As part of the analysis, IRS data was matched to Volkswagen sales data for the tax year 2009, the only year that Volkswagen vehicles qualified for the tax credit.
The tax credits were tied to incentives found in The Energy Policy Act of 2005. The Act was signed into law by President George W. Bush on August 8, 2005, and included provisions for an alternative motor vehicle tax credit. With the alternative motor vehicle tax credit, taxpayers were entitled to a tax break for the purchase of hybrid vehicles, fuel cell vehicles and alternative fuel vehicles – the “norm” at the time for energy efficient vehicles. It also included certain advanced lean-burn technology vehicles, those that generally run on diesel fuel.
As with most auto-related tax credits, there was a limit on the numbers of qualified hybrid and advanced lean-burn technology vehicles eligible for credit. The vehicles which qualified for the credit were identified in advance; the IRS had to first acknowledge the manufacturers’ certifications that the vehicles qualified. For 2009, the qualifying vehicles for the alternative motor vehicle tax credit and the amounts of the credits were:
- 2009 Volkswagen Jetta 2.0L TDI Sedan manual or automatic ($1,300)
- 2009 Volkswagen Jetta 2.0L TDI SportWagen manual or automatic ($1,300)
- Mercedes GL 320 BLUE TEC ($1,800)
- Mercedes R 320 Blue TEC ($1,550)
- Mercedes ML 320 Blue TEC ($900)
The credit was only available to the original purchaser of a new, qualifying vehicle.
Putting those numbers together, the analysis showed that about $51 million was paid out in incentives to individual taxpayers for vehicles that should not have qualified. Of course, those taxpayers who applied for the credit didn’t do anything willful: they couldn’t have known that the software had been manipulated. Nonetheless, Volkswagen’s subterfuge likely resulted in millions of dollars related to tax credits which were paid out in error.
Luke Tonachel, director of clean vehicles and fuels project at the Natural Resources Defense Council, told the L.A. Times that those millions shouldn’t be ignored when the Environmental Protection Agency (EPA) issues its ruling on fines. Those fines could be steep. The company could pay to up to $18 billion in EPA fines. The matter is also under investigation by the Department of Justice. There has also been speculation that German officials might launch a criminal investigation.
So far, the company has put nearly $7 billion aside to handle claims and public relations relating to the scandal. As reports pour in, it may not be enough. That’s clearly rattling shareholders: Volkswagen shares opened at $105.00 on Wednesday, down from $169.65 the previous Wednesday.
