The Volkswagen diesel emission scandal deepened on Tuesday as German regulators ruled that software to evade the use of emission-control systems constituted an illegal "defeat device."

Known by its initials KBA, the German Federal Motor Transport Authority issued its decision in an e-mail--though the extent of penalties to which VW could be subjected from the ruling is unclear.

European Union member countries have varying penalties for such cheating; several states have not yet enacted penalties even though they were supposed to do so years ago.

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As noted in a summary by The New York Times of recent events, Tuesday was "a turbulent day for the company."

Sales results for the month of November showed that Volkswagen had sold 25 percent fewer cars last month than in November 2014, roughly corresponding to its percentage of sales from diesel vehicles it has told its dealers not to sell until fixes are approved by U.S. regulators.

Meanwhile, the company said that roughly 50 employees had come forward with information about the emission software and its history, under an offer of amnesty that ended on November 30.

And Standard & Poor's downgraded its ratings on Volkswagen corporate debt, reflecting increasing worry about the company's financial future in the face of continued repercussions and new information about the extent of the damage.

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Volkswagen staff admitted in September to officials at the U.S. Environmental Protection Agency that it had installed software in its EA189 2.0-liter four-cylinder TDI diesel engines that detected when a car was being tested, and kept its emissions of nitrogen oxides in particular within legal limits.

Under regular use, however, the software apparently routed around those emission controls--leading to NOx emissions as high as 35 times the regulatory maximum at time during real-world testing.

2015 Volkswagen Golf TDI SE

2015 Volkswagen Golf TDI SE

In the ten weeks since the scandal broke, CEO Martin Winterkorn and other high executives have resigned, regulatory agencies on multiple continents have opened investigations, civil suits have been filed, and the company has lost billions of dollars of value.

Further investigations into its 3.0-liter V-6 TDI diesel engines have been opened. And VW has admitted it had three separate Auxiliary Emission Control Device software routines in those engines that it had not properly declared to the EPA, one of which qualifies as a "defeat device" too.

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Volkswagen had previously said that it didn't know whether the software in question constituted a "defeat device" under European rules.

The KBA's determination underscores the company's vulnerability in markets where it has sold millions of diesel vehicles, not just the 482,000 in question in the U.S.

Matthias Müller

Matthias Müller

VW Group CEO Matthias Müller is expected to issue some kind of interim update within a few weeks on the progress of the company's internal investigations into the incident.

Meanwhile, the fallout continues.

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