The US Justice Department's environment and natural resources division has opened a criminal investigation into Volkswagen
Frankfurt (AFP) - "Made in Germany" was a tag that inspired confidence the world over and industrial prowess, along with "green" credentials, were a constant source of pride for Europe's economic powerhouse.
But that image now threatens to be deeply tarnished by the spiralling scandal over the pollution test cheating by auto giant Volkswagen, long a paragon of German engineering.
In an affair that broke on Friday and has unfolded rapidly since then, VW was forced to admit on Tuesday that 11 million of its diesel cars around the world are equipped with devices that can cheat pollution tests.
Volkswagen, based in Wolfsburg in northern Germany, was originally founded in the 1930s under the Nazi regime to build an affordable car for all Germans and now commands a sprawling global empire with annual sales of 200 billion euros.
The company's name, which translates as the "People's Car", "represented an ideal of German engineering. But this image now has scratches and dents, to say the least," the conservative daily Die Welt wrote in an editorial.
VW liked to play on the "Made in Germany" tag that stood for reliability. And in order to sell its iconic Beetle car in the United States -- where it was viewed as too small and too round by drivers used to vast, sleek limousines such as Cadillacs and Fords -- the German company came up with a pragmatic advertising slogan in the 1960s.
"It's ugly, but it gets you there."
"'Made in Germany' was always honest, always upstanding. It never cheated. VW is Germany's biggest (car) company, a flagship. Nobody would have thought that VW cheated," said auto industry expert Ferdinand Dudenhoeffer.
That image had now been damaged and even threatened to drag down rival German automakers such as BMW and Daimler with it, as well as car parts suppliers such as Bosch and Continental.
"If (Germany's) reputation is under threat, so are growth and prosperity, since one job out of every seven depends directly or indirectly on the automobile industry," said the daily Sueddeutsche Zeitung in a leader comment.
The reliability and quality of its industrial products, its cars, its machinery and its chemicals, are one of the main selling points for Germany's vibrant export industry, a bulwark of the economy.
- Chancellor Merkel's word -
Conscious of just how much is at stake, the German government is demanding a thorough investigation of the matter, but also seeking to calm nerves.
Economy Minister Sigmar Gabriel expressed confidence that VW would clear up the matter quickly and thoroughly.
And he insisted the reputation of cars and products "Made in Germany" was not at stake and would remain a sign of quality.
The timing of the scandal could not be worse for the government.
Chancellor Angela Merkel is scheduled to travel to New York on Friday to persuade fellow members of the United Nations to adopt climate goals ahead of a UN climate conference in Paris in December.
Merkel sees herself as champion of climate issues and would like to see Germany's decision to abandon nuclear power and the transition to renewable energy as one of her most lasting legacies.
In June, she helped draw up ambitious carbon emission reduction goals adopted by the Group of Seven (G7) countries.
At the same time, she has always robustly defended the interests of her country's automakers and postponed the implementation of European emission limits.
"Other countries are going to grin ... what is Chancellor Merkel's word going to be worth if the biggest German (car) company cheats," asked industry expert Dudenhoeffer.
Carmakers have always been keen to market diesel engines as being clean technology.
But the BDI industry federation sought to play down the fallout from the affair.
The scandal "is currently only about a single company. It's pure speculation to surmise that an entire sector, or industry as a whole and even the whole German economy is affected," it said.
Rival carmaker Daimler has distanced itself, insisting it was not targeted in any investigation.
But investors are not so sure and both Daimler's and BMW's shares were among the biggest losers on the Frankfurt stock exchange on Tuesday, after Volkswagen's, which have lost an unprecedented 35 percent in two days.