Volkswagen faces a slew of probes

David Shepardson
Detroit News Washington Bureau

New York — Volkswagen AG’s troubles deepened dramatically Monday, as the House Energy and Commerce Committee announced it would hold a hearing into how VW violated U.S. laws by selling nearly a half-million cars since 2009 with software that allowed it to deliberately evade emissions tests.

VW CEO Martin Winterkorn apologized over weekend.

It was a day of bad news upon bad news for VW: The Environmental Protection Agency revealed to The Detroit News that it also is investigating additional VW diesels from the 2016 model year; the Justice Department has launched a criminal investigation into the cheating scandal; and shares of the German automaker fell nearly 20 percent, wiping out $17 billion in market value, as regulators around the world said they, too, would probe VW for emissions-test cheating.

VW U.S. brand chief Michael Horn, at the unveiling of the new Passat in New York late Monday, vowed to fix the cars and fully cooperate after breaking the trust of Americans.

“Let’s be clear about this: our company was dishonest — with the EPA and the California Air Resources Board — and with all of you. And in my German words: We totally screwed up. We must fix those cars.”

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VW not alone in evading emissions rules

Horn said the automaker will work to prevent this from ever happening again. Horn vowed to make things right for VW’s 5 million American owners as well as its dealers. He said “our future” depends on turning the crisis into an opportunity. VW “will do what it needs to be done” and “pay what we need to pay” to make things right. He said that kind of behavior “is completely inconsistent with our core.”

Christopher Grundler, director of the EPA’s Office of Transportation and Air Quality, told The News that his agency is expanding its review to the Audi 3.0L V6 and Porsche Cayenne, which has the same engine. Both already were certified for 2016. Audi, VW’s luxury brand, also uses that engine in the diesel Q5, A6, A7 and A8.

“They were certified well before we knew what we know now,” Grundler said.

He reiterated the agency will not certify the 2016 diesel 2.0-liter engine until the automaker demonstrates that the engines meet U.S. emissions standards.

Germany, the European Union and South Korea said Monday they plan to begin reviewing VW’s diesel vehicles. Their actions came after the EPA and California Air Resources Board said Friday the automaker had written vehicle software to only activate anti-pollution control equipment during testing — and not in road use — in 482,000 2009-15 Volkswagen Jetta, Passat, Sportwagen, Beetle and Audi A3 cars with 2.0-liter TDI engines.

“We will follow the facts,” said Energy and Commerce Committee Fred Upton, R-St. Joseph, and Oversight and Investigations Subcommittee Chairman Tim Murphy, R-Pa. “We are also concerned that auto consumers may have been deceived — that what they were purchasing did not come as advertised. The American people deserve answers and assurances that this will not happen again. We intend to get those answers.”

A person briefed on the matter confirmed several media reports that the Justice Department has opened a criminal investigation into VW’s emission cheating.

The EPA said it is looking to see if other automakers are breaking the rules with diesel vehicles. California and U.S. agencies have begun procuring in-use diesel vehicles produced by other manufacturers to screen them for possible defeat devices, the EPA said in a statement to The News.

Andreas Kubler, a spokesman for the German Environment Ministry, told reporters in Berlin that it had asked automakers for information to determine if similar efforts had taken place there, according to several reports. The European Union also is investigating.

The EPA says the cars’ software intentionally detects when the car is undergoing official emissions testing, “and turns full emissions controls on only during the test.” When vehicles are being driven normally, the computer disables the emissions controls. As a result, the cars emit 10 to 40 times the allowable smog-forming pollution, environmental officials allege. That action, they said, is illegal and a public health threat.

Analysts have speculated that there are only two advantages to such a mechanism: VW may have wanted to get higher fuel economy for the cars or avoid more expensive emissions controls like those on larger diesel VWs built during the time frame.

The German carmaker could, in theory, face up to $37,500 in fines per vehicle — a total of $18 billion. But it isn’t clear how much EPA could actually fine VW.

The deepening of the crisis coincided with the event for the Passat. VW canceled a question-and-answer session with top executives from Germany.

Some analysts said Monday the scandal could prevent VW from dethroning Toyota as the world’s largest automaker this year. In the first six months of the year, VW had 5.04 million in worldwide sales, compared to 5.02 million for Toyota.

Fitch Ratings said the developments could “seriously undermine the group’s brand image, particularly in the U.S., where Volkswagen is already struggling to increase its market share.”

The German automaker has made diesels a big part of its U.S. strategy. Diesels last year accounted for nearly 22 percent of VW-brand U.S. sales.

Adding to VW’s problems was a lawsuit filed Sunday on behalf of VW owners in federal court in central California. The law firm Keller Rohrback charged that VW “deliberately deceived well-meaning, environmentally conscious consumers and regulators when it installed defeat devices in 482,000 Volkswagen and Audi vehicles.”

The suit noted that “consumers nationwide paid a premium for vehicles that did not perform as promised while releasing as much as 40 times the amount of pollution as advertised during normal driving conditions.”

Consumers could demand compensation for a decline in resale value. But the cars may actually achieve better fuel-efficiency without the emissions equipment in road use.

The suit was filed on behalf of seven VW diesel owners in California, Washington and Connecticut. It seeks compensation and “injunctive relief, among other things, for consumers nationwide.”

Lynn Sarko, a managing partner at Keller Rohback, said, “Volkswagen’s decision to prey on environmentally conscious consumers who paid a premium of thousands of dollars for a supposedly cleaner-running car, and who received a polluting vehicle instead, is despicable. Consumers nationwide are justifiably outraged, and Volkswagen will have to answer to them.”

The EPA expects to force VW to issue a recall. It could take up to a year to identify a fix, develop a recall plan and issue recall notices.The agency won’t prevent owners from driving their vehicles before a fix is available.

But it has taken the unusual step of refusing to allow VW to sell 2016-model cars with the diesel engines.