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Heads roll as VW scandal claims CEO

Volkswagen CEO Martin Winterkorn has resigned in the wake of the company's diesel emissions scandal.

The Volkswagen diesel scandal has claimed its first high profile scalp, with CEO Martin Winterkorn stepping down despite insisting he had no knowledge of the software designed to cheat emissions tests.

"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," said Mr Winterkorn, who will walk away with a $46 million package.

"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.

"I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part. Volkswagen needs a fresh start. I am clearing the way for this fresh start with my resignation."

Related: Does the VW diesel scandal affect you?
More: ACCC launches investigation into VW diesel emissions scandal
Also: VW diesel scandal goes global

It comes as $41.5 billion was wiped from the value of Volkswagen in the wake of the crisis and industry analysts are questioning whether the company will survive.

VW had set aside a staggering $10 billion (6.5 billion euros) for compensation claims and rectification work, but that figure is expected to triple once fines are taken into account.

The crisis is also likely to hit the brakes on VW's growth. It had planned to overtake Japanese giant Toyota by 2018 and was on track to reach that target this year, three years earlier than expected.

The funds set aside so far are equivalent to the development of 10 all-new models

But aside from its focus on fixing the diesel scandal and securing the jobs of 270,000 workers (VW is Germany's single biggest employer), the payouts are likely to halt or delay future vehicle development.

The funds set aside so far are equivalent to the development of 10 all-new models, more than half VW's passenger car range.

VW will now need to delay those plans while the funds are diverted to fixing the diesel issue.

Meanwhile, marketing experts believe the crisis may cause permanent damage to VW's image.

They were thought to be environmentally friendly and that image has now been completely eroded

A University of Sydney Business School marketing expert says it will be "very tough" for Volkswagen to recover from the scandal.

"Volkswagen is the people's car with a reputation built on reliability and its German brand," said Senior Lecturer in Marketing, Rohan Miller

"People also bought VWs because they were thought to be environmentally friendly and that image has now been completely eroded. It is going to be very difficult for Volkswagen to recover."

How was the fault discovered?

In May 2014 a couple of clean air campaigners — Peter Mock and John German — wanted to conduct a real-world test to highlight the efficiency of VW diesel engines. They enlisted the help of West Virginia University which had the testing equipment and were shocked to find the emissions were up to 35 times more than in test lab conditions.

Why is it a problem?

Because the VW cars equipped with these engines are far more polluting than they claim to be. They also likely have better performance because the engines are not restricted by the anti-pollution equipment.

How many cars are affected?

Globally, 11 million diesel cars among the VW group of brands are affected, including some Audi and Skoda models. Porsche is also being investigated because its Cayenne diesel V6 is sourced from VW. In Australia, VW is yet to confirm how many, if any, cars are affected. But a News Corp Australia investigation has found more than 50,000 of the potentially affected vehicles were sold from 2009 to 2015.

Should owners be worried?

The car should drive normally and there should not be any problem outside normal servicing and maintenance issues. Health experts say it’s not a good idea to leave the car idling if you are getting something out of the boot, because the exhaust gases may not be as clean as claimed.

What’s the fix?

For now, there isn’t one. But it may involve VW customers taking their cars back to the dealership to have the engine computer reprogrammed. The process itself could take as little as an hour in a best-case scenario. The car may have less performance afterwards and may require more regular servicing as the toxins, soot and other nasties are likely to build up in the engine more quickly if the ant-pollution equipment operates normally.

VW: by the numbers

11 million: the number of cars affected globally by the VW diesel scandal.

50,000: the number of cars sold in Australia between 2009 and 2015 with the same engines, although VW is yet to confirm if they are affected.

$10 billion: the amount in Australian dollars (6.5 billion Euros) VW has set aside for rectification work and compensation claims.

$18 billion: the estimates for the cost of compensation claims in the US alone.

$25 billion: the estimated cost of US fines.

$41.5 billion: how much was wiped off the value of VW in the wake of the crisis.

$170: the value of VW shares before the diesel scandal was made public.

$110: the value of VW shares after the diesel scandal was made public and CEO Martin Winterkorn resigned.

0: how much information VW has been able to provide the Australian public (*at time of publication, which is 21 days after VW admitted it had cheated the system).