The defiant boss of Volkswagen has refused to resign despite an escalation of the the emissions scandal following the admission by the world’s second largest car marker that 11m vehicles worldwide have been fitted with a defeat device designed to cheat emissions tests.

Martin Winterkorn appeared in a video to insist he was “endlessly sorry” for the events at the end of a day in which VW was forced to deny a report in Germany that he will leave as chief executive this Friday, to be replaced by Matthias Müller, the chairman of its sister company Porsche.

He spoke after the German company revealed the potential financial liabilities for the first time. It is putting aside €6.5bn (£4.7bn) to deal with the potential costs of the crisis, prompting a further 20% fall in its share price.



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About €25bn, or a third, has now been wiped off the value of Volkswagen’s shares in the two days of trading since the scandal erupted. Shares in other car manufacturers have also fallen heavily, with Peugeot down 7%, BMW down 5% and Daimler, the owner of Mercedes-Benz, also down 5%. Johnson Matthey, which makes catalytic converters, has fallen nearly 7% in London.

The VW financial update was issued on Tuesday after its US chief said on Monday night that the company had “totally screwed up” over the emissions scandal. Michael Horn admitted at an event in New York that VW had been dishonest with regulators and the public.



Facebook Twitter Pinterest Angela Merkel sits in a Volkswagen Tiguan at the Frankfurt International Motor Show on Thursday. The chancellor has called for ‘complete transparency’. Photograph: Uwe Anspach/EPA

The number of cars affected dwarfs the 482,000 VWs and Audis recalled by the US Environmental Protection Agency (EPA). The figure is also higher than the number of cars VW sells in a year worldwide, reflecting the scale of the crisis.

While tthe VW boss was defiant, there was a separate intervention by Olaf Lies, a member of VW’s supervisory board and also the economy minister for the state of Lower Saxony, which controls 20% of the company. He said there were likely to be management changes as a result of the scandal.

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“I am sure that there will be personnel consequences in the end, there is no question about it,” he told Reuters.

Angela Merkel has also commented on the growing crisis. “Given the difficult situation, this is about showing complete transparency, clearing up the entire case,” the German chancellor said in Finland. “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.”

VW could face a fine of up to $18bn (£11.6bn), as well as criminal charges for its executives and legal action from customers and shareholders amid claims in the US that it used a device to falsify emissions data. The device recognises when the car is being tested and immediately cuts emissions to a level much lower than normal and which would be unsustainable under normal driving conditions.

In a statement, VW said: “Discrepancies relate to vehicles with type EA 189 engines, involving some 11m 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.”



The carmaker insisted in the statement that new diesel vehicles available in the European Union with EU 6 diesel engines “comply with legal requirements and environmental standards”.

It added: “The software in question does not affect handling, consumption or emissions. This gives clarity to customers and dealers.”

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The German company said it was putting aside a provisional €6.5bn to “cover the necessary service measures and other efforts to win back the trust of our customers”.

It added: “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.”

Analysts warned that the crisis could affect other carmakers, with shares down heavily across the sector.

Max Warburton at Bernstein warned it could spell the end for diesel cars. The analyst, who on Sunday called VW the “Lance Armstrong of automakers”, said: “Diesel has been under growing pressure in recent years, as regulators recognise that it is still not as clean as gasoline, despite meeting official tests.

“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.”

Facebook Twitter Pinterest Volkswagen CEO Martin Winterkorn, second from left, stands next to Angela Merkel at Frankfurt motor show on Thursday. Photograph: Jens Meyer/AP

In further developments, Britain and France called for a Europe-wide investigation into diesel cars to reassure the public.

Patrick McLoughlin, the transport secretary, said: “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.”

A spokesman for the commission said it was “premature” to comment on whether there would be a European investigation into VW.

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South Korea said on Tuesday it would investigate emissions of the VW Jetta and Golf models plus Audi A3 cars produced in 2014 and 2015. If problems are found, South Korea’s environment ministry said its inquiry could be expanded to all German diesel imports, which have surged in popularity in recent years in a market long dominated by local producers such as Hyundai.



The US Department of Justice could also conduct a criminal investigation into Volkswagen.

The UK campaign group Transport & Environment (T&E) warned that millions of cars could be recalled. T&E’s diesel expert, Jos Dings, said: “Our latest report demonstrated that almost 90% of diesel vehicles didn’t meet emission limits when they drive on the road. We are talking millions of vehicles.”