VW Weighs Buyback of Thousands of Cars in Talks With U.S. – Bloomberg

Posted: Friday, January 08, 2016

Volkswagen AG may buy back tens of thousands of cars with diesel engines that can’t be easily fixed to comply with U.S. emissions standards as part of its efforts to satisfy the demands of regulators, according to two people familiar with the matter.

Negotiations between the German automaker and the U.S. Environmental Protection Agency are continuing and no decisions have been reached. Still, a buyback would be an extraordinary step that demonstrates the challenge of modifying vehicles that were rigged to pass emission tests.

VW has concluded it would be faster to repurchase some of the more than 500,000 vehicles than fix them, said the people, who declined to be cited by name because they weren’t authorized to discuss the matter publicly. One person said the number of cars that might be bought back from their owners totals about 50,000, a figure that could change as talks continue.

“We’ve been having a large amount of technical discussion back and forth with Volkswagen,” EPA Administrator Gina McCarthy said Thursday, when asked about the possibility of VW having to buy back some vehicles. “We haven’t made any decisions on that.”

Way Forward

McCarthy told reporters after an event in Washington Thursday that VW’s proposals to bring its cars into compliance with emissions standards have so far been inadequate.

“We haven’t identified a satisfactory way forward,” McCarthy said. The EPA is “anxious to find a way forward so that the company can get into compliance,” she said.

VW is continuing talks with U.S. authorities and working toward a solution, said Eric Felber, a company spokesman. He declined to comment on details of the discussions.

The models in question aren’t the oldest ones, the so-called Generation 1 cars, the people said. Volkswagen’s U.S. chief, Michael Horn, said in October that those models would be the most complicated to bring into compliance.

VW engineers have been working on adding an SCR catalytic converter to those cars, the people familiar with the process said. This would mean installing a tank of urea-based solution that, when mixed with exhaust, binds with the smog-causing nitrogen oxides to reduce emissions.

McCarthy is scheduled to meet with Volkswagen Chief Executive Officer Matthias Mueller at his request on Jan. 13 in Washington — the day before the California Air Resources Board is scheduled to publicly respond to VW’s proposed repairs. Mueller will be making his first visit to the U.S. as VW’s CEO next week.

The shares rose 2.3 percent to 117.65 euros at 9:38 a.m. in Frankfurt. Volkswagen has lost about 15 billion euros ($16.3 billion) in market value since its admission to cheating on emissions tests became public in September.

Lawmakers’ Request

Two Democratic U.S. senators urged Volkswagen to offer U.S. consumers multiple options to compensate for damages and inconvenience of owning the diesel cars, including a speedy repair and money for lost resale value and any decrease in fuel economy.

“For owners who no longer want their car, Volkswagen should buy back the vehicle at the fair market value that existed prior to the time at which Volkswagen’s fraudulent activity was made public,” Senators Richard Blumenthal of Connecticut and Edward Markey of Massachusetts said in a letter to VW’s Horn.

Volkswagen admitted in September that it rigged the software of 482,000 diesel cars beginning in 2009 to pass U.S. emissions tests. When not being tested, the cars released pollution well in excess of permitted levels.

EPA and the California board are also investigating whether 85,000 VW, Audi and Porsche vehicles with 3.0-liter diesel engines are violating clean-air standards.


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