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As Volkswagen CEO quits, Germany mulls lessons of emissions scandal

Volkswagen admits using sophisticated software to foil emissions inspections. Some claim the scandal could harm the vaunted brand of German manufacturing and undercut the nation's reputation for playing by the rules. 

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Volkswagen shares plunged more than 20 percent on Monday, their biggest ever one-day fall, after news that the German carmaker had rigged US emissions tests.

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Volkswagen’s emissions scandal has pummeled its stock price, tarnished its image, and forced out its CEO. Yet that may be just the tip of the iceberg.

News that the German car manufacturer had equipped 11 million of its diesel cars around the world with devices to cheat emissions tests also threatens to wound Germany’s national psyche, one that puts a premium on playing by the rules.

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“Millions of people in the world trust our brand, our cars, and our technology,” Volkswagen CEO Martin Winterkorn said in a video message Tuesday, before he stepped down today. “I am endlessly sorry that we have betrayed that trust.” 

While Mr. Winterkorn’s comments pertained specifically to Volkswagen, he could have been speaking for all of Germany. So-called “German engineering” has helped the country become the third largest exporter in the world. It’s a hard-earned reputation that explains why Germany’s reaction to the Volkswagen scandal goes beyond the financial hit it faces. 

“What may make the disaster much worse to many Germans,” writes Rick Noack in The Washington Post, “is the disrespect VW's actions show for their values.”

It may be considered cliché by some, but Germans do indeed take pride in their precision and obedience to the rules — values both celebrated and sometimes mocked abroad.

Anyone who has visited Berlin or other German cities will inevitably have noticed the omnipresent role of both.

For instance, even when there are no cars in sight, German pedestrians often refuse to cross at a red traffic light — simply because it's against the law. 

Winterkorn has denied any personal wrongdoing, and a Volkswagen company panel said he wasn't involved in the software strategy. The firm's stock has fallen by around 30 percent since the scandal broke last week. 

It’s too early to tell how the scandal will reverberate across Germany’s economy. But some analysts worry that it could damage the country’s manufacturing sector.

Every seventh job in Germany is linked to the auto industry, reports The Wall Street Journal. And the industry accounts for a third of Germany's corporate research and development expenses. Germany’s biggest company, Volkswagen has nearly $226 billion in sales and 600,000 employees.

On Tuesday, German Chancellor Angela Merkel called on the company to be “fully transparent” to quickly clarify the allegations.

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“Given the difficult situation, what is needed now is full transparency and to clarify the whole process,” she told reporters in Berlin when asked if she feared the scandal could hurt Germany’s auto industry. “I hope all the facts will be put on the table quickly.”

Manuela Kasper-Claridge, head of Deutsche Welle’s business and science department, remains optimistic about the industry’s future. In an opinion piece published Tuesday, she argues that the scandal would likely spur an "industry-wide refocusing" to prevent any future recurrences. 

The sector is in for a period of radical technological change over the next decade or two. As we move toward self-driving, self-parking cars that serve as mobile Internet hotspots and entertainment units and an increasing trend toward clean, low-carbon engines, getting from one place to another promises to be a very different experience a few years down the road.

Come what may, German automakers have every intention of remaining among the best and most innovative world-wide.

But Volkswagen faces a long road to recovery. The company is  subject to a criminal investigation in the United States and could face as much as $18 billion in fines. Germany has announced that it will investigate whether Volkswagen's emissions data had been falsified in Europe too.