Volkswagen CEO Martin Winterkorn has resigned after it emerged the company deliberately equipped 11 million of its diesel-engined models with a device to cheat emissions testing, however the 68 year-old industry veteran maintained his innocence in the matter.
"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," Winterkorn said in a statement released overnight.
"I am doing this in the interests of the company even though I am not aware of any wrong doing on my part."
Winterkorn's departure had been predicted by many after it became apparent Volkswagen knew of the emissions-cheating software, which was fitted to vehicles equipped with the automaker's EA189 2.0 litre four-cylinder diesel engine.
The software, uncovered by the United States Environmenal Protection Agency, allowed cars fitted with that engine to detect when an emissions test was taking place and adjust its tune accordingly to pass it.
The method used was simple, yet ingenious.
During an typical emissions test a car is run up to various speeds on a dynamometer, or rolling road. The wheels turn, but the steering wheel remains still. That was the system's signal to activate its emissions-friendly tune.
However when the steering wheel was in motion - like when the car is being driven on the road - the defeat device would deactivate, allowing emissions of harmful gasses, principally nitrogen oxide, to skyrocket by as much as 40 times the claimed value.
Nitrogen oxide reacts with sunlight to create ozone, which if found near ground level has been shown to stunt growth in plants and damage the respiratory systems of animals - including humans.
For Volkswagen, plenty of damage has already been done. Share values have plummeted since the emissions scandal broke, with around 30 percent being wiped off VW's stock price.
Prices stabilised after Winterkorn's departure was announced, however it remains to be seen what long-term effect the scandal will have on the company.
Other Auto Stocks Also Tumble
Right now though, it appears to be shaking investor confidence in the automotive industry as a whole - even for brands unconnected to the VW scandal. Renault shares are down by 6.5%, and stocks for fellow French automaker Peugeot are down by 7.7%.
Volkswagen has also hired legal firm Kirkland & Ellis to defend it against the growing number of class action law suits and investigations related to the emissions scandal, and has set aside 6.5 billion Euros (AU$10.2 billion) to cover compensation claims and fines.
Kirkland & Ellis also represented BP following the Deepwater Horizon oil spill disaster in 2010.
The true extent of the fallout has yet to be felt though. The German Government has already announced it will investigate whether VW vehicles sold in Europe also featured the same defeat device as found in US-market cars.
Pending the results of that investigation, Volkswagen may find itself in even hotter water.
Winterkorn's replacement will likely be announced tomorrow.