Volkswagen’s US recall proposals rejected – The Week UK

Posted: Thursday, January 14, 2016

US regulators have rejected Volkswagen’s plans to recall those diesel cars fitted with devices designed to cheat emissions tests.

The California Air Resources Board (Carb) said the car-maker’s proposals did not “adequately address overall impacts on vehicle performance, emissions and safety” and were not planned over a suitable or quick enough timescale.

They added that VW’s planned fix was “incomplete, substantially deficient and falls far short of meeting the legal requirements”.

The state of California has sent the company a detailed confidential letter outlining why the proposals have been rejected. It also reaffirmed its commitment to the ongoing investigation into the scandal and its desire to talk with Volkswagen and find a solution, reports Reuters.

“Volkswagen made a decision to cheat on emissions tests and then tried to cover it up,” said Carb chairman Mary Nichols.

“They continued and compounded the lie and when they were caught they tried to deny it. The result is thousands of tons of nitrogen oxide that have harmed the health of Californians. They need to make it right.”

In response, Volkswagen said: “Today’s announcement addresses the initial recall plans Volkswagen submitted to Carb in December. We are committed to working co-operatively with Carb and other regulators and we plan to continue our discussions tomorrow when we meet with the [Environmental Protection Agency].”

Despite not being huge for Volkswagen, the US market is proving difficult for the company in the wake of the scandal. Although only 600,000 of the 11 million cars affected worldwide were in the US, it was their authorities who first broke news of the emissions rigging scandal.

It is also where the first defeat devices were fitted after a push to sell more diesel vehicles in 2005 ended in engineers not having the time to properly develop engines that met strict Californian emissions laws.

American owners are to receive a “goodwill” package as a result of the scandal, unlike UK drivers, whom Autocar says will receive no compensation.

Continuing their buttering up of US customers, VW chief executive Matthias Muller issued a “lengthy apology” to the American people during his keynote speech at the Consumer Electronics Show in Las Vegas earlier this month, says The Drum.

Volkswagen could face £61bn fine in US lawsuit

05 January

The US Department of Justice has filed the opening lawsuit against Volkswagen, alleging that almost 600,000 VW, Porsche and Audi cars in the United States were fitted with illegal defeat devices, resulting in excessive harmful emissions.

Volkswagen could now face enormous fines. Reuters reports that in theory, the total could exceed $90bn (£61bn) if the maximum $37,500 (£25,500) fine per car in violation of the law is enacted.

The touted total vastly exceeds the “in excess of $18bn” first predicted in September 2015, when the emissions scandal broke.

To win its civil case, the US government does not need to prove the degree of intentional cheating at Volkswagen, just that the deception occurred.

The complaint, filed by the Department of Justice on behalf of the Environmental Protection Agency, alleges that VW group’s actions not only caused “emissions to exceed its standards”, but also violated the Clean Air Act “by selling, introducing into commerce, or importing into the United States motor vehicles that are designed differently from what Volkswagen had stated in applications for certification”, says Autocar.

The magazine adds that the company is believed to be arguing that the maximum fine would “cripple” it and that its future depends on the courts showing leniency.   

The Justice Department is also investigating criminal fraud allegations against Volkswagen for misleading the US regulators as well as VW customers, though such cases cannot be brought to court as easy as civil lawsuits and require more burden of proof. The Wall Street Journal says the civil lawsuit is unlikely to be the end of the US government’s pursuit of VW, but rather an opening move which could pave the way for other legal actions.

Volkswagen has already set aside $7bn (£4.6bn) to cover the costs incurred by a large-scale recall programme of vehicles fitted with the emissions defeat devices which is scheduled to run through 2016. Worldwide, around 11m diesel-engine VW group cars are affected in the scandal worldwide.

Elon Musk: force Volkswagen to become a zero emissions car company

21 December

Elon Musk, CEO of the California-based premium electric car company Tesla Motors, has signed a letter to Californian emissions regulators urging them to scrap plans to force VW into fixing cars affected by the emissions scandal.

Instead, Musk and other signatories argue that the cash and resources should be used to turn Volkswagen into a zero-emissions car company.

The letter was signed by over 40 businesspeople and CEOs in the clean energy industry, as well as environmental activists.

The letter argues that car companies’ never ending pursuit of even cleaner and more efficient diesel engines is reaching “the point of de miminis returns.” It also adds that it is no surprise that VW had to cheat to meet emissions levels and that “meeting future tighter diesel standards will prove even more fruitless.”

“A giant sum of money thus will be wasted in attempting to fix cars that cannot all be fixed”, states the letter, before laying out a five point plan releasing VW from its current obligations to recall and fix cars, and instead force VW down the route of accelerating the introduction of zero emissions vehicles.

A part of the proposal also suggests that Volkswagen invest in new manufacturing plants and research to the same amount “that they otherwise would have been fined.”

“In contrast to the punishments and recalls being considered, this proposal would be a real win for California emissions, a big win for California jobs, and a historic action to help derail climate change – we strongly urge CARB to consider this proposal in resolving the VW cheating scandal”, it concludes.

Newsweek reports that the California Air Resources Board declined to directly address the letter.

It comes not long after Volkswagen made large changes to its management structure, according to the Wall Street Journal.

VW announced changes to the structure of the Volkswagen group in the hope of decentralising power and delegating more responsibility to individual brands, in an early December press conference.

European Union to investigate Volkswagen 

17 December

The European Union is to hold an inquiry into the Volkswagen emissions scandal.

According to Sky News, the wide-ranging inquiry could last up to a year, and will investigate whether auto industry regulators were too “hands-off” amid claims that EU regulators ignored suspicious emission levels.

The committee of 45 MEPs will also investigate alleged breaches of EU law, and “maladministration”.

Olaf, an arm of the European Commission, will investigate Volkswagen regarding the misuse of loans provided by the European Investment Bank (EIB), a person “familiar with the matter” told the Financial Times. The EIB has provided Volkswagen with €4.5bn in loans since 1990, €1.9bn of it currently outstanding. The EIB has said that these loans were provided to help VW develop and improve “environmental performance”.

Volkswagen is currently under investigation from the US Department of Justice and the Environmental Protection Agency, after the scandal was first uncovered in the United States.

The emissions scandal involves up to 11 million diesel engine Volkswagen group cars, each fitted with a defeat device that can detect when the car is undergoing an emissions test, switching the car into a special mode, which provides deceiving emission levels.

Last week at a press conference in Wolfsburg, the chairman of the VW Group’s Supervisory Board, Hans Dieter Pötsch, revealed that the scandal had its origins in a 2005 push by Volkswagen into the US diesel market.

VW’s diesel engines could not meet the strict rules on nitrous oxide emissions in California, and Volkswagen had neither the time nor resources available to find a legitimate solution, so engineers fitted a defeat device.

A ‘chain of errors’ meant that this deception was repeated for several years.

Volkswagen reveals how emissions scandal began – details first findings of investigation

10 December

Volkswagen has held a press conference to detail the first findings of its internal investigation into the emissions scandal which has engulfed the automotive giant since September.

Speaking in Wolfsburg, New Chairman of the VW Group’s Supervisory Board, Hans Dieter Pötsch, and CEO Matthias Müller explained the origins of the scandal, the conditions which allowed it to happen, the future of the Volkswagen group, as well as new information for current owners.

When and why did VW begin to use the defeat device?

The defeat device was originally conceived as software to be used on cars sold in the USA. Potsch revealed how in 2005, VW planned a large push of new diesel cars in the US market. However, engineers did not have the time or resources to make the engines comply with California’s tough nitrous oxide laws, so a defeat device was used.

From these beginnings, a ‘chain of errors’ meant the device was used to cheat emissions, and when a legitimate solution was found, it was not implemented to its full extent. Potsch told those in attendance that the scandal happened partly because of individual misconduct, but also flaws in VW group processes, and “an attitude in some units of the company that tolerated breaches of rules.”

What next for owners of vehicles affected?

VW will compensate owners if a drop in resale value is triggered by the scandal, and will also pay for any increases in tax owners must pay as a result of the changes the impending recall will have on vehicles.

2.0 litre and 1.2 litre engines will receive a software update, but 1.6 litre engines will require component changes.

Most importantly, Muller confirmed that the changes will have a negligible effect on performance, emissions and economy. “customers won’t be able to feel it.” He told Auto Express.

The recall will begin in January with the most common 2.0 litre variant, with others coming in the second and third quarter of 2016 according to the Guardian. However, the company is still working on fixes to cars in the US market, where owners will also receive a compensation package.

What next for the VW Group?

During the press conference, it was announced that the Volkswagen group would undergo large scale restructuring. Individual brands within the VW Group stable should become more independent, and the company is determined to use the scandal as a “catalyst for change.”

Muller said that the plan to de-centralise the group was always on the cards, but the emissions scandal has triggered Volkswagen to push forward with plans to change the company sooner rather than later. “We have not given up our claim of leadership in our industry,” he said.

Autocar reports that the shift to the new group structure will begin early next year, with a full realignment by 2017.

The external report being carried out by law firm Jones Day will not be published until some time next year. Volkswagen say they are handling over 100 terabytes of data – the equivalent of 50 million books.

Regarding the investigation and the company’s determination to right its wrongs, Potsch said “We are relentlessly searching for those responsible and they will be held to account.”

Volkswagen emissions scandal: only 36,000 vehicles are affected, VW says

09 December

Volkswagen has announced that the number of VW cars sold with false carbon dioxide emissions ratings was overestimated.

The company now says the number of cars sold with incorrect CO2 emissions represents 36,000 annually, down from the 800,000 first reported in November and representing 0.5% of the company’s yearly sales.

Nine different Volkswagen vehicles, each of them specific versions of certain models, make up the 36,000 cars with the wrong CO2 figures. Versions of the VW Polo, Jetta, Scirocco, Passat, Passat Alltrack and Golf are affected.

VW has announced that no fixes to the affected cars will be carried out as they are not necessary, and as a result the MPG figures for the cars sold with the wrong carbon emissions will not change.

The company also stated that “Only a small number of the model variants of new cars will have the catalogue (CO2) figure slightly adjusted” to reflect the findings of the investigation.

The nine model variants will undergo testing by an independent authority before the year is out, and anomalies will result in offending vehicles having their official figures re-adjusted, as well as VW subsidising owners if any subsequent changes result in cars moving to higher tax brackets, according to Auto Express.

Autocar reports that the Volkswagen group originally set aside €2 billion to deal with the issue of false CO2 figures, but it is unknown if this figure will be decreased as a result of the findings.

Volkswagen says the findings more or less conclude the petrol side of the emissions scandal, but it still remains that 11 million cars were sold with diesel engines fitted with defeat device software to cheat emissions tests, and UK sales were down 20 per cent in November.

Other Volkswagen stable brands, such as Audi, Skoda and Seat, will publish their own findings shortly.


VW ‘could sell luxury brands’ to fund Diesel-gate loan

08 December

The Volkswagen Group could be prepared to sell some off its luxury car brands to pay back a one-year loan of around €20bn, Reuters reports.

Volkswagen has told the banks supplying the credit line that it will sell its assets if no other way of repaying the loan is possible, according to two sources.

VW secured the €20bn loan earlier this week and plans to refinance it by issuing bonds, claim the sources.

If it came to selling assets, one of VWs likely divestments would be their MAN subsidiary. MAN is known for truck and lorry production but also makes diesel engines for ships and turbo-machinery.

It is likely that MAN’s non-commercial vehicle production units would be sold first if VW needed to raise cash next year – and they have been valued at up to €5bn.

But the sources also say: “Volkswagen may also consider divesting luxury car brands Bentley and Lamborghini or motor bike brand Ducati.”

These claims should be taken with “a pinch of salt,” says Carscoops, which adds that VW is also cutting costs by eliminating certain trim levels from their cars.  Indeed, one of Reuters’s sources adds that VW’s low-production luxury brands “don’t really move the needle”.

Autoblog, meanwhile, explains that the loan is “necessary as a buffer in case the automaker doesn’t have enough money on hand to repair vehicles or settle upcoming fines”.

The reports come as another big-name departure from the VW group is announced’: Dr Ulrich Hackenberg, who – according to Top Gear – was “one of the most influential and prolific car engineers of the modern era”, retired last week.

Volkswagen has “declined to comment”, says Reuters.


Volkswagen sales slump by 20% in UK

04 December

Sales of Volkswagen cars in the UK have fallen 20 per cent, the latest figures from the Society of Motor Manufacturers & Traders show.

There were 12,958 registrations of new Volkswagen cars in the UK last month, in comparison to 16,196 in November 2014.

The fall reflects the UK reaction to VW’s diesel emissions scandal, where over 11 million cars have been equipped with defeat devices in order to cheat emissions testing, almost 1.2 million of them in the UK.

Other Volkswagen group brands took a hit as well, with Seat down 24 per cent, Skoda down 11 per cent and Audi down four per cent, reports the BBC.

The drop follows reports signalling VW sales in the USA have also slumped by 25 per cent.

VW’s UK sales dropped 10 per cent in October, but the November sales figures are the first true representation of UK consumers reactions to the scandal, given it can take a few weeks for car deliveries to happen, claims the Daily Mail.

Autocar said a Volkswagen spokesman responded to the dip by saying the company don’t look at monthly fluctuations, but instead prefer to focus on the year as a whole, and they expect to be up on 2014 sales figures overall in 2015.

Better news came for Volkswagen in the shape of the Golf being the fourth-highest selling single car, delivering 4,336 in November.

Volkswagen sales down 25% in USA

2 December

Volkswagen has reported a 24.7 per cent drop in US sales for November, compared with the same month last year, as the damage done by the recent emissions scandal starts to take effect.

The news is the first real and clear sign of the “undoubtedly serious damage” the scandal has done to Volkswagen’s reputation in America, says Wired

VW sold fewer than 24,000 vehicles in the US last month, compared with 32,000 in November last year. The Passat and Golf models saw the sharpest decline, reports the BBC.

The sales drop is not accounted for by Volkswagen removing 2.0 litre TDi and 3.0 litre V6 powered models from US sale. According to Jalopnik, petrol powered VWs have suffered a nine per cent fall year-on-year in the USA.

The United States is not a large market for Volkswagen, but global sales in October were down by five per cent to 490,000 deliveries.

News of the emissions scandal first broke when US researchers found that Volkswagen deliberately cheated emissions tests by fitting cars with a ‘defeat device’, which can detect when the car is undergoing examination. Up to 11 million Volkswagen diesels are affected worldwide, and VW is in the process of beginning recalls to fix affected cars.

The drop in sales comes as the US auto industry looks forward to a record year, reports The Guardian, with carmakers expected to have sold 18.2 million cars to US customers in 2015.


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