Volkswagen shares are diving again on Tuesday. They're down by as much as 20% as of noon UK time (7 a.m. ET) after losing more than 20% in trading on Monday. More than a third of the company's market value has been wiped away in just two days.
VW Sept 22Investing
Investors are seriously concerned about the company after US regulators found that software the carmaker designed for diesel cars gave false emissions data. VW faces fines of up to $18 billion (£11.6 billion), the Environmental Protection Agency said on Friday.
The company said Tuesday that up to 11 million cars worldwide were affected by the scandal.
It issued a profit warning setting aside €6.5 billion (£4.70 billion, $7.27 billion) to "cover the necessary service measures and other efforts to win back the trust of our customers." It adds: "discrepancies relate to vehicles with Type EA 189 engines, involving some 11 million vehicles worldwide."
Here's the kicker from the company's statement:
Volkswagen plans to set aside a provision of some 6.5 billion EUR recognized in the profit and loss statement in the third quarter of the current fiscal year. Due to the ongoing investigations the amounts estimated may be subject to revaluation.
Earnings targets for the Group for 2015 will be adjusted accordingly.
The scandal goes to the heart of the carmaker's business. In a research note Monday, Evercore auto analyst Arndt Ellinghorst called the violation a "move more worthy of a back-street garage looking to get a used car through a mandated vehicle inspection."
The company fitted its US diesel cars with software that activates the pollution controls only when the car is undergoing official emissions testing.
The cars with the software — called a "defeat device" — would pollute at 10 to 40 times the legal limits when driven normally, the EPA estimated.
The problem is a lot more widespread than first thought. Volkswagen said: "Further internal investigations conducted to date have established that the relevant engine management software is also installed in other Volkswagen Group vehicles with diesel engines."
"For the majority of these engines the software does not have any effect," the company said in the statement.
Other car companies aren't avoiding the plunge. BMW is down 6.18%, and Daimler is down 6.39%.
Meanwhile, European markets are slumping. The FTSE 100 is down 2.27%, the Euro Stoxx 50 is off 2.82%, and Germany's DAX index is down 2.81%.
Shares in RSA Insurance are recovering slightly from a 20% plunge on Monday on news that Zurich Insurance walked away from its £5.5 billion ($8.5 billion) bid for the company.
Here's what that looks like:
RSA Sept 22Investing