The Washington Post
In ads, Volkswagen touted its popular Jetta and Beetle diesels as paragons of clean-fuel technology: Buyers were promised a car that was “clean, fuel efficient, and powerful,” according to one 2013 testimonial.
In reality, the claims were based in part on a clever ruse, U.S. officials alleged on Friday. For at least five years, Volkswagen officials illegally rigged their vehicles’ pollution-control systems so they would run cleanly only during emissions tests, while spewing higher levels of pollutants on the highway, the Environmental Protection Agency said.
The EPA joined California state officials in accusing the German automaker of deliberately circumventing air-pollution laws with the use of a software “defeat device” installed on nearly 500,000 Volkswagen and Audi diesel models sold in the United States since 2008. If substantiated, the violation could lead to billions of dollars in penalties and repair costs, agency officials said.
“Volkswagen was concealing the facts from the EPA, from the state of California and consumers,” Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance, said at a news conference announcing legal action against the company. “We expected better from VW.”
A notice of violation posted Friday said the rigged software was used in five diesel models, including several of the company’s best-sellers. An EPA statement hinted of a future recall, saying it was “incumbent on Volkswagen to initiate the process” to fix the affected cars’ emissions systems.
“Using a defeat device in cars to evade clean air standards is illegal and a threat to public health,” Giles said.
The alleged scheme employed a sophisticated algorithm, installed in the emissions-control modules, that could detect when a vehicle was undergoing emissions testing. The software, which the EPA called a “defeat device,” would turn on full emissions controls during testing and switch them off again under normal driving conditions.
As a result, the cars emitted far more pollution than advertised—up to 40 times the federal standard for NOx, a component in urban smog, the EPA said. NOx can contribute to asthmatic attacks and other respiratory illnesses that send millions of people to the hospital each year.
Volkswagen had no comment about the allegations Friday.
Agency officials said the problem was first detected last year by a group of West Virginia University researchers. The team was conducting tests of Volkswagen’s 2.0-liter diesel engine when it noticed variations in emissions levels. The results were shared with EPA and discussed in conversations with company officials, who acknowledged that a software change accounted for the varying emissions rates.
Investigators later found the software in diesel versions of Golfs, Jettas and Beetles and Audi A3s beginning with the model year 2009, and in Volkswagen Passats beginning with 2014 models, according to an agency fact sheet. Officials said no immediate action is required by car owners and that Volkswagen ultimately will be required to fix the problem.
Legally, the EPA could assess the company a $37,500 fine for each car that violated clear-air standards — which could total $18 billion. In all likelihood, though, the final penalties will be less than that amount.
“While the diesel vehicles do not meet air pollution standards, they continue to be safe and legal to drive,” said Janet McCabe, acting assistant administrator for the Office of Air and Radiation. “We will hold VW responsible for recalling the affected vehicles…at no cost to consumers.”
The EPA has authority under the Clean Air Act to order a recall, though it could take up to a year for a formal notice to be issued, officials said.
“Our goal now is to ensure that the affected cars are brought into compliance,” said Richard Corey, executive officer of California’s Air Resources Board. He said federal and state agencies intended to “dig more deeply into the extent and implications of Volkswagen’s efforts to cheat on clean air rules and to take appropriate further action.”
The allegations prompted sharp criticism of Volkswagen from environmental and consumer protection groups.
“The charges here are truly appalling,” said Frank O’Donnell, director of Clean Air Watch. “It was cheating not just car buyers but the breathing public.”
Ellen Bloom, senior director of federal policy for Consumers Union, said the allegations, if confirmed, amounted to a “serious violation of the law.”
“Volkswagen was ripping off the consumer and hurting the environment at the same time,” she said.
Automakers have a long history of using defeat devices. In 1998, the EPA reached a $1 billion settlement with diesel-engine companies such as Caterpiller, Renault and Volvo for installing equipment that defeated emission controls. It was, at the time, the largest U.S. civil penalty for violating environmental law. The EPA said the firms installed the devices in an estimated 1.3 million engines in tractor trailers and large pick-ups.
That same year, Honda and Ford settled EPA cases also accusing them of using defeat devices. With Ford, the problem was found in 60,000 Econoline vans, allowing for excessive pollution at highway speeds. Honda was found to have disabled the misfire monitoring device on 1.6 million cars, depriving emission control inspectors of that information.
CEO falls on metaphorical sword
"I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part," Winterkorn said after an emergency meeting with Volkswagen directors.
Winterkorn, 68, was Volkswagen (VLKAY) CEO for eight years. The German company, which also owns the Audi and Porsche brands, had just achieved his long-standing goal of overtaking Toyota (TM) to become the biggest automaker three years ahead of target.
But his position had looked increasingly precarious since the scandal broke Friday, when U.S. regulators said the company had deliberately programmed some 500,000 diesel-powered vehicles to emit lower levels of harmful gases in official tests than on the roads.
The crisis escalated Tuesday when Volkswagen revealed it had found significant emissions discrepancies in 11 million diesel vehicles worldwide.
Winterkorn, an engineer and former head of Audi, said he was stunned by the scale of the misconduct, and was accepting responsibility to clear the way for a "fresh start" for the company.
"The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis."
The company's stock price has crashed, causing big losses for investors such as the Gulf state of Qatar. Trust has been severely shaken in a brand that is at the heart of German manufacturing and exports.
Winterkorn had apologized profusely, twice, and the company has set aside 6.5 billion euros ($7.3 billion) to cover the cost of recalls and other efforts to limit the damage, trashing its profit forecast for the year in the process.
But the final bill could be much higher. The company faces civil and possible criminal fines in the U.S. that are likely to total billions of dollars. And it's unclear yet whether it will have to issue massive recalls in other markets.
Volkswagen faces a huge challenge to stabilize the company. Senior Volkswagen directors said more heads could roll in the next few days. A new CEO is likely to be appointed Friday, and a special committee will be established to oversee the internal investigation.
The directors said the perpetrators had caused "unmeasurable harm" to Volkswagen, and called for those held responsible to be prosecuted.
It's hard to overstate the significance of the crisis in Germany, where making quality cars is central to the country's reputation as a manufacturing and export powerhouse. The auto industry accounts for about 20% of exports, and employs 775,000 people directly.
German Chancellor Angela Merkel has described the situation at Volkswagen as "difficult" and urged the company to show complete transparency and explain its actions in full. Britain and France have called for a Europe-wide investigation, and Italy wants to know whether it has been affected.
Regulators in the U.S. said Volkswagen cheated on environmental standards by programming engine management software in some diesel cars to turn on emission controls only when being tested. Cars equipped with the device would run up to 40 times more emissions when on the road, the EPA said.
Volkswagen has been ordered to recall the vehicles, and the company is halting sales of some cars in the U.S.
The scandal has also dragged down shares in other carmakers and suppliers on fear the fallout could affect the wider industry.
A European environmental group issued a report earlier this month that suggested other manufacturers may be using technology that allow their diesel cars to appear cleaner in official tests than in normal road conditions.
The ACEA, which represents 15 automakers in Europe, said Wednesday that there was no evidence that this is is "an industry-wide issue."
They also cheated in Europe
Volkswagen has admitted rigging emissions tests in Europe in the same way it falsified results in the US, Germany's transport minister has said.
Alexander Dobrindt said it was not known how many of the 11 million vehicles affected were in Europe.
He also said other manufacturers' vehicles would be checked.
The scandal began unfolding on Friday when the German car giant said it had used software in the US to provide false emission test results.
Mr Dobrindt said he had been told vehicles with 1.6 and 2.0 litre diesel engines are "affected by the manipulations that are being talked about".
The company's Jetta, Beetle, Golf and Audi A3 models in the US from 2009 to 2015, and the Passat from 2014-15, were fitted with the devices which produced doctored results. However, diesel cars are far more popular in Europe than in the US.
Analysis: Theo Leggett, Wolfsburg
The city of Wolfsburg in Lower Saxony is not merely the hometown of Volkswagen. Wolfsburg is Volkswagen, Germany's answer to Detroit - but rather more prosperous.
It was founded in the 1930s as a place to house workers building the KdF-Wagen - the car which became the VW Beetle after the Second World War.
Even today, more than half of the town's 120,000 inhabitants work at the local VW plant, a sprawling complex that covers some 6.5 sq km. Many of the rest provide the services which those employees need, such as shops and restaurants.
So a crisis at Volkswagen is a crisis for Wolfsburg.
It threatens the entire social and economic fabric of this town. People here are reluctant to speak about the scandal in the United States, wary of showing disloyalty.
But it is clear the events of the past week have taken a heavy toll.
Mr Dobrindt also said random tests would be conducted on cars made by manufacturers other than VW: "It is clear that the Federal Office for Motor Traffic will not exclusively concentrate on the VW models in question but that it will also carry out random tests on vehicles made by other carmakers."
The value of Volkswagen has shrunk by around 30% since the scandal was revealed.
Separately, BMW shares dropped by 10% on reports the false tests had been used by other carmakers.
The company issued a statement denying the report, saying the "group does not manipulate or rig any emissions tests".
"We observe the legal requirements in each country and adhere to all local testing requirements," it continued.
VW is setting aside €6.5bn (£4.7bn) to cover the costs of the scandal.
The German car giant's chief executive Martin Winterkorn resigned following the revelation.
Mr Winterkorn said he was "shocked" by recent events and was "not aware of any wrongdoing on my part".
The supervisory board said it would announce Mr Winterkorn's successor at a board meeting on Friday.
There has been speculation in German newspapers that Matthias Mueller would be named as the next chief executive. He is head of Porsche, which is part of the Volkswagen group of companies.
German public prosecutors are considering an investigation, with US authorities also said to be planning criminal investigations
"it takes two sides to end a war but only one to start one. And those who do not have swords may still die upon them." Tolken
