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The logos of German car maker Volkswagen is seen at a VW dealership in the Queens borough of New York, September 21, 2015.

SHANNON STAPLETON/Reuters

Volkswagen Canada Inc. has halted sales of diesel car models amid a scandal over falsified U.S. emissions tests that risks tarnishing its image in North America.

As Volkswagen AG and the German government launched investigations, the auto maker's shares skidded 18 per cent on the Frankfurt DAX index.

Volkswagen's troubles began last week when the U.S. Environmental Protection Agency said software for Volkswagen and Audi cars equipped with diesel engines deceived regulators measuring toxic emissions. On Friday, Washington issued an order to Volkswagen to recall nearly half a million cars.

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The crisis is likely to batter Volkswagen's reputation as it attempts to boost sales in the United States and Canadian markets as part of a goal to sell more than 10 million vehicles worldwide by 2018 and become the global leader in customer satisfaction and quality. Its annual report includes a two-page section titled "On the way to becoming the ecological leader."

Chief executive officer Martin Winterkorn issued an apology.

"I personally am deeply sorry that we have broken the trust of our customers and the public," Dr. Winterkorn said in a statement. "We do not and will not tolerate violations of any kind of our internal rules or of the law."

Volkswagen's board was already scheduled to vote this coming Friday on whether he should be reappointed for another term as CEO.

Volkswagen Canada Inc. has halted sales of vehicles equipped with diesel engines in Canada amid reports that U.S. emissions tests were manipulated to fool U.S. regulators.

Golf, Jetta and Beetle cars from the 2009-2015 model years are equipped with the same diesel engines as the U.S. vehicles, as were Passat cars from the 2012 and 2013 model years, Volkswagen Canada spokesman Thomas Tetzlaff said Monday.

"We have issued a stop sale notice to our dealers in Canada for the affected vehicles, so they can't sell them," Mr. Tetzlaff said. The affected vehicles have not, however, been recalled.

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The 2.0-litre diesel engine affected is offered only as an option on Audi A3 cars in Canada. Audi, the luxury division of Volkswagen, has stopped offering that engine as an option, Audi Canada spokesman Cort Nielsen said.

The U.S. Environmental Protection Agency said last week that software for Volkswagen and Audi cars equipped with diesel engines deceived regulators measuring toxic emissions. On Friday, Washington issued an order to Volkswagen to recall nearly half a million cars.

Volkswagen shares plummeted 20 per cent Monday in reaction to the controversy.

Mr.  Winterkorn, said the auto maker will co-operate with regulatory agencies and has ordered its own internal investigation.

Canadian regulators do not independently test vehicles to make sure they are meeting requirements, but relies on tests performed by the EPA.

Mr. Tetzlaff said Volkswagen Canada is co-operating with the EPA and has informed Canadian regulators of the situation.

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About 22 per cent of the vehicles Volkswagen sells in Canada are equipped with diesel engines, Mr. Tetzlaff said.

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