What exactly is the Volkswagen fiasco all about

The US government has ordered Volkswagen to recall almost 500,000 cars after discovering that the company deployed sophisticated software to cheat emission tests allowing its cars to produce up to 40 times more pollution than allowed.

German carmaker Volkswagen has taken a beating in its share price which tumbled over 20 per cent on Monday on news that it had fitted a software in its diesel care that gave false emissions data.  

Reports suggest that WV indulged in such a fraudulent practice just to boost sales in the US where rival cars were way ahead of it.  

What led to a situation that exposed wrongdoing of VW  

The authorities said VW used a device that turns off the emissions controls during normal driving situations, allowing the cars to emit more than the legal limit of pollutants. 

Volkswagen marketed the diesel-powered cars, which account for about 25 per cent of sales, as being better for the environment. The cars include VW Jetta, Beetle, Golf and even Passat models. 

The company will have to recall nearly 500,000 affected cars, which will impact its cash flows heavily.  

Now, what does VW say about the entire episode  

VW’s chief executive Martin Winterkorn issued an apology and said the group had ordered an external investigation into the matter.  

"The management 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," Winterkorn said.  

Action VW faces from the US government  

The US government has ordered Volkswagen to recall almost 500,000 cars after discovering that the company deployed sophisticated software to cheat emission tests allowing its cars to produce up to 40 times more pollution than allowed.

Revelations from the Environmental Protection Agency in the US stated VW had dodged environmental rules for which penalty could run up to more than $18 billion.