AutoNation CEO: VW deliberately schemed to deceive

Scale of Volkswagen deception

Mike Jackson, leader of the nation's largest auto dealer chain, said Wednesday Volkswagen's U.S. emission deception is "absolutely shocking" and a "systemic failure."

"This is not a rogue employee. This is not a bad apple. This is not poor judgment. This is not a lapse. This is not negligence. This is a deliberate scheme to deceive customers and regulators," said the chairman and CEO of AutoNation, which is the largest seller of VWs in the U.S.

Volkswagen's board is meeting Wednesday, a gathering likely to have seismic consequences for the German automaker and its embattled chief executive, Martin Winterkorn.

VW plans to make a provision of $7.3 billion in the third quarter following the revelations. As many as 11 million vehicles could be affected.

"The strategic brand position of VW in the United States is at risk. And their sales for the next decade or two can be impacted on how they behave over the next few days, weeks and months," AutoNation's Jackson told CNBC's "Squawk Box" in an interview. "What they need to do is take accountablity, full responsibility. And then proceed to do whatever it takes to make customers whole, shareholders whole, [and] regain the trust of regulators."

The chief of Volkswagen of America used this week's launch of the new Passat to issue an apology. Michael Horn said, "We have totally screwed up."

The U.S. Environmental Protection Agency said Friday that Volkswagen could face penalties of up to $18 billion.

"I would be shocked if this is in other companies" outside of Volkswagen, Jackson told CNBC on Wednesday. "I do not think it overflows to Porsche and Audi and [VW's] other brands."

—Reuters contributed to this report.