Measuring the Fallout From Volkswagen's Diesel Disaster (BusinessWeek)

The pollution-masking scandal couldn't come at a worse time for the giant auto maker.

Volkswagen lost almost a quarter of its market value in a matter of minutes, but the fallout from its recent corporate crash over diesel emissions will go on for quite some time. After admitting that it cheated on U.S. air pollution tests for years, the German auto giant faces up to $18 billion in fines from the U.S. Environmental Protection Agency. European regulators, state regulators, criminal prosecutors, and consumer-rights groups are just starting to dig into the details of the case. Four issues, however, are becoming quite clear.

1. The scandal could not come at a worse time for VW

Volkswagen is a brand adrift, particularly in the crucial U.S. market. Its sedans–the Jetta and Passat–look pretty much the same as they did a decade ago. The SUVs are either too small and boxy (the Tiguan) or too expensive (the Touareg) for the tastes of U.S. drivers these days.

Between 2012 and 2014, Volkswagen sales in the U.S. plunged 16 percent, while the auto industry at large posted a 14 percent gain in vehicles moved. The brand skidded another 4 percent this year through August.

2. A very raw deal for dealers

Bearing the brunt of this slump, in addition to the executives in Wolfsburg, Germany, are the 650 or so dealerships selling—or at least trying to sell–the vehicles. Late last year, Alan Brown, a Dallas salesman and chairman of Volkwswagen’s dealer council, told Automotive News that up to 30 percent of the brand’s dealerships have been struggling to turn a profit.

Today, those same shops have been told to stop selling a wide swath of models that includes all 2015 and 2016 vehicles with the company's 2.0 liter TDI engine. Meanwhile, VW has been on a recruiting mission to expand its dealership count by 15 percent in the U.S. by 2018. The recent diesel disaster won’t pad those stats. It may, in fact, do the opposite.

3. A knock on diesel's rehabilitated image

Americans, generally, haven’t warmed up to diesel the way Europeans have. It can be expensive and hard to find, and it smells funny. Now Volkswagen's emissions gamesmanship has sullied diesel among some of the its only champions: environmentally conscious consumers.

Volkswagen is one of the only automakers that has managed to make some momentum with diesel in the U.S. BMW and Mercedes sell a few models, and the pickup companies always roll out a small batch of diesel trucks. But VW puts up real numbers in the category. In August, the company sold almost 9,000 diesel models in the U.S.—16 percent of its business.

4. Whither Porsche?

Almost 300 of the diesels VW sold in August carried a badge that reads Porsche, one of the best-selling and most profitable brands in the industry of late. Thus far, Porsche hasn’t been tainted by the scandal engulfing its parent company. But rest assured that the EPA and others are taking a close look at the engines on its diesel offering, a version of the Cayenne SUV starting to $62,300.