Shares in German car maker Volkswagen have plunged by a fifth after it admitted rigging US emissions tests for nearly 500,000 diesel cars and was ordered to recall the vehicles to be fixed.
Chief executive Marin Winterkorn said he was “deeply sorry” after findings by America’s Environmental Protection Agency (EPA) that it had cheated clean-air rules.
The company faces fines that could eventually total billions of dollars.
The EPA said that VW used software that allowed its diesel cars to release fewer smog-causing pollutants during tests than in real-world driving conditions.
Its findings cover about 482,000 cars built in the last seven years including the Audi A3, VW Jetta, Beetle, Golf and Passat models.
The EPA said cars had been fitted with sophisticated software algorithms which detect when they are undergoing official emissions testing, and turn full emissions controls on.
It is a type of software known as a “defeat device”.
Once on the road, the cars produced nitrogen oxide pollutants at up to 40 times the legal standard.
Cynthia Giles, assistant administrator for the Office of Enforcement and Compliance Assurance, said: “Using a defeat device in cars to evade clean air standards is illegal and a threat to public health.”
Mr Winterkorn said: “I personally am deeply sorry that we have broken the trust of our customers and the public.
“We will co-operate 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 EPA said VW faces fines of up to 37,500 US dollars (£24,000) per vehicle for the violations – a total of more than 18 billion US dollars (£12 billion).
The shares fall wiped around 15 billion euros (£11 billion) off VW’s market value, as the stock reached a three-year low of around 130 euros (£95).
It has already had a tough year having fallen from more than 250 euros (£180) amid signs of faltering sales in the US and China.
Volkswagen edged out Toyota to become the world’s top-selling car maker in the first half of 2015.
A spokesman for Germany’s environment ministry said that, for now, authorities there were waiting to see how the US investigation develops.
“The auto manufacturers have to work closely with US authorities to comprehensively clarify the matter,” Michael Schroeren told reporters in Berlin.
“We expect reliable information from the car manufacturers so that (German authorities) can check whether comparable manipulation has happened in Germany or Europe.”
Government spokesman Steffen Seibert declined to comment directly on the case, but said Germany’s standing as a leader in environmental protection hadn’t been harmed.
“Our climate policy stands for itself and I think it’s internationally recognised that Germany is one of the drivers on the way to (the international climate summit in) Paris,” he said.