Everything You Need to Know About VW's Diesel Scandal

Volkswagen is in hot water around the world after admitting to cheating emissions tests with its diesel-powered cars.

Allegations of cheating were recently leveled at Volkswagen by the U.S. Environmental Protection Agency (EPA), after which VW admitted to using defeat devices in certain diesel-equipped cars.

SEE ALSO: Have Your Say on Volkswagen’s ‘DieselGate’ Disaster

Here’s what you need to know about this scandal:

The defeat device used is a specific code embedded in the vehicle’s onboard computers that can detect when emissions tests are taking place. During testing, the code automatically makes the engine emit far less pollution than normal. When running during normal driving conditions, these engines can emit 10 to 40 times more harmful NOx into the air.

SEE ALSO: Here’s How VW Tricked the EPA’s Emissions Test

It is being said that Volkswagen may have done this while marketing its “Clean Diesels” to Americans. Most other diesel cars require some sort of additive to make then run cleaner, which weren’t needed with many of Volkswagen’s “Clean Diesels.”

The vehicles affected by the problem so far are the 2009 to 2015 TDI Volkswagen Golf, Jetta, Passat and Beetle sold in the United Stares. Also affected is the 2009-2015 Audi A3 equipped with the diesel engine. The specific engine is the 2.0-liter TDI four-cylinder unit. German regulators are also investigating to see if European diesel models have manipulated emissions testing.

Volkswagen has come forward and admitted that 11 million cars have the illegal software globally. The EPA has also announced that it is expanding its investigation to include the automaker’s 3.0-liter V6 diesel engine, which is used in various Audi models and the Porsche Cayenne.

UPDATE: Audi has revealed that 2.1 million of its vehicles are fit with software that is meant to cheat diesel emissions tests.

If you own one of the affected Volkswagen vehicles and are wondering what to do next, click here.

At this point, no official recall has been announced, though it seems almost certain there will be one. In its initial release, the EPA said that, “It is incumbent upon Volkswagen to initiate the process that will fix the cars’ emissions systems.”

VW maintains the cars are still completely safe and legal to drive.

UPDATE: Volkswagen has signaled its intention to recall all 11 million of the affected vehicles. The company says that is has a “comprehensive” plan to fix the affected cars, but as of September. 29, the details of the plan are still unknown.

SEE ALSO: Volkswagen Just Lost Billions in Post-Scandal Stock Slide

No. Volkswagen is currently not selling any 2015 model year cars with the 2.0-liter TDI four-cylinder engine. At this time, the EPA will not grant a “certificate of conformity” for 2016 model year Volkswagen vehicles with the TDI engine, meaning they are also not for sale. Canada has also issued a stop sale on the affected cars until the issue is resolved.

SEE ALSO: With Diesel Sales Halted, Here’s What Volkswagen is Doing to Help its Dealers

Volkswagen is offering financial assistance to its dealers to help them while sales of these diesel vehicles are halted. The company is guaranteeing bonus payments in September of $300 for each new car sold and $600 for each Passat, while offering floorplan financing reimbursement for diesel vehicles stuck on dealership lots that cannot be sold. The reimbursement plan will include both new and certified-used TDI models affected by the stop-sale until repair instructions are released.

That is also unclear at this point. If Volkswagen simply issues a software fix, it is very likely that its TDI vehicles will lose performance and fuel efficiency to meet the proper standards. Another possibility is the addition of an entirely new Urea injection system, something most of these cars do not have. That would likely cost thousands of dollars per car.

SEE ALSO: What is Diesel Exhaust Fluid?

VW’s official statement reads:

“As environmental protection and sustainability are among Volkswagen’s strategic corporate objectives, the company takes this matter very seriously and is cooperating with the investigation. Volkswagen is committed to fixing this issue as soon as possible. We want to assure customers and owners of these models that their automobiles are safe to drive, and we are working to develop a remedy that meets emissions standards and satisfies our loyal and valued customers. Owners of these vehicles do not need to take any action at this time.”

Volkwagen’s CEO, Prof. Dr. Martin Winterkorn issued a statement on the matter along with a video apology.

“The Board of Management at Volkswagen AG takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter.

“We do not and will not tolerate violations of any kind of our internal rules or of the law. The trust of our customers and the public is and continues to be our most important asset. We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire Board of Management.”

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UPDATE: Volkswagen CEO DR. Martin Winterkorn resigned his position in the wake of the issue.”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,” Winterkorn said in a statement issued announcing his resignation. “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,” said Winterkorn.

SEE ALSO: VW CEO Resigns in Wake of Diesel Emissions Scandal

Volkswagen USA CEO Michael Horn commented on the scandal during the unveiling of the new 2016 Passat.

“As you have seen since Friday, the EPA, the Environmental Protection Agency, has issued a statement and reality that Volkswagen Group manipulated engine software in our TDI diesel cars, and we violated emissions standards.

“The CEO of our parent company, Dr. Martin Winterkorn, said yesterday Volkswagen will fully cooperate with the responsible agencies, and much much more important as I see it, he stated that he was personally and deeply sorry for this—that Volkswagen has broken the trust of our customers, and the public here in America. And lastly he stated that this matter, and this is I think common sense, now this is the first priority for him personally and for the entire product management team.

“So let’s be clear about this: Our company was dishonest with the EPA and the California Air Resources Board, and with all of you. And in my German words, we’ve totally screwed up. We must fix those cars and prevent this from ever happening again, and we have to make things right—with the government, the public, our customers, our employees, and also very importantly our dealers.”

SEE ALSO: Winterkorn Apologizes Again, VW Denies Report of CEO’s Firing

Sources reported early in the week that Prof. Dr. Martin Winterkorn had been fired from his post and replaced by Porsche CEO Matthias Müller. So far, Volkswagen has denied these reports, and Winterkorn has shown no signs of quitting. Volkswagen’s supervisory board has a meeting coming up to discuss extending or ending Winterkorn’s contract.

UPDATE: Volkswagen has named Matthias Müller as its new CEO.

SEE ALSO: Porsche Boss Matthias Mueller Named CEO of Volkswagen

If the EPA leverages its maximum fine, which is $37,500 per vehicle, the overall penalty could add up to $18-billion. The EPA is also working with the U.S. Department of Justice to investigate the case and criminal charges may follow. A report from Bloomberg says that Volkswagen is the target of a U.S. criminal probe.

The impact could be even bigger if European authorities or regulators find any wrongdoing in their investigations. German regulators have said they will investigate to see if Volkswagen manipulated emissions testing in Europe.

Besides fines, Volkswagen’s market value has dropped by almost 20 percent, and the company has lost 15-billion euros (USD$16.9-billion) in market value so far.

UPDATE: A class action lawsuit has also been filed against Volkswagen.

VW will also have to endure a huge PR crisis as it attempts to repair the damage this scandal has done to its reputation. Volkswagen will have to regain the trust of consumers globally, even though the cars affected so far are only in the U.S.

With all the money lost in fines and lawsuits, the costs of an inevitable and huge recall, a massive PR campaign, and the hit to its market value, this could affect development of future vehicles and people’s trust in automakers and diesel in general. People will also inevitably start wondering if other automakers with diesel cars have cheated.