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Volkswagen had planned to offer its new-for-2016 Passat with a 2.0-liter diesel engine. But U.S. sales of diesel VWs are on hold while the company scrambles to respond to allegations that it cheated on emission-control tests. Image source: Volkswagen Group.

Eleven million cars.

Volkswagen Group (NASDAQOTH:VLKAY) said on Tuesday that 11 million cars powered by its 2.0-liter TDI diesel engine had software intended to cheat emissions testing.

VW will set aside €6.5 billion ($7.3 billion) "to cover the necessary service measures and other efforts to win back the trust of our customers," it said in a statement. That will appear as a charge in VW's third-quarter earnings report.

That's a huge sum. But the final bill could be much larger. VW's statement warned that "the amounts estimated may be subject to revaluation." 

VW stock stock closed at just over €161 on Friday, before the news of the scandal broke. As I write this on Tuesday, it's trading at about €110. The company has lost almost a third of its market cap in just two days.

Now it's a global scandal, and the consequences could be immense
The stock's drop is no surprise. These revelations make this scandal a much bigger deal. It started with the U.S. Environmental Protection Agency and California air-quality regulators alleging that VW had installed software in its cars that cheated on emissions tests. But now, governments around the world are demanding answers from the German automaker -- and criminal charges are possible.

In Europe, the French, British, Swiss, and German governments have all begun investigations or asked the European Union to open a wider inquiry. Australia is also opening an inquiry. South Korea's government said that it will examine all of VW's diesel models -- and if they find problems, the probe will be expanded to all German-made diesel cars sold in the country.

Audi

The Audi version of the 2.0 TDI engine. U.S. regulators allege that the engine was programmed to cheat on emissions tests. Image source: Audi.

Both BMW and Daimler, Mercedes-Benz's corporate parent, have issued statements saying that their diesel-powered vehicles comply with all applicable laws and regulations.

More governments are likely to take action in the coming days. But VW might be spared severe consequences in China: While VW is the largest-selling automaker in China, it sells almost no diesels in the country.

The consequences are ramping up in the United States, however. This has already become much more than a civil violation of the Clean Air Act. 

Criminal charges could be forthcoming -- and VW's CEO may be a goner
Bloomberg reported on Monday that the U.S. Justice Department has begun a criminal investigation into Volkswagen's effort to evade U.S. emissions laws. And Congress is getting involved, with members of the U.S. House of Representatives Energy and Commerce Committee saying that they plan to hold hearings on the VW scandal in the near future. 

It's likely that similar investigations will be getting under way around the world before long. The pressure on Volkswagen's CEO, Martin Winterkorn, is growing quickly. Already in trouble with his board for VW's sluggish growth, he may not last the week. 

VW has already had to refute one report that Winterkorn was about to be dismissed. The report, in Germany's Tagesspiegel newspaper, said that Winterkorn would be replaced by Matthias Mueller. Mueller is currently the CEO of Porsche, which is controlled by VW. 

A VW spokesperson denied the report -- but a Porsche spokesperson told Reuters that Mueller was at VW's headquarters, attending a board meeting. 

How will Volkswagen repair the damage to its reputation?
A deliberate decision to cheat emission-control regulations around the world is a massive blunder. But Winterkorn -- or whoever is advising him -- has mostly made the right moves since the scandal broke, at least when it comes to PR damage-control. 

So far, VW seems to be taking a page from the same crisis-management playbook that General Motors CEO Mary Barra worked from when GM's recall scandal broke early in 2014: Get all the facts out quickly and try to shift the focus to the company's efforts to solve the problem. 

Winterkorn has more or less admitted that the EPA's allegations are true. He has commissioned an external investigation to find out exactly how this happened.  He issued an apology, of sorts, and promised to work to regain the trust of customers and the public. 

And as we saw with this morning's announcement, the company seems to have decided to make all of the bad news public as quickly as possible.

But with regulators -- and prosecutors -- around the world pondering action in the wake of this morning's statement, there may be more shoes left to fall. 

John Rosevear owns shares of, and The Motley Fool recommends, General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.