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VW Dieselgate scandal ensnares German supplier, to pay $35M fine

Nora Naughton
The Detroit News
A German auto supplier, IAW GmbH, agreed to plead guilty to federal conspiracy charges and to pay a $35 million for its involvement in Volkswagen AG's global diesel emissions scandal.

Detroit — A German engineering company has agreed to plead guilty in U.S. District Court here to federal conspiracy charges and to pay $35 million for its involvement in Volkswagen AG's diesel emissions-cheating scandal.

Berlin-based IAV GmbH engineers and designs products for powertrain, electronics and vehicle development. It is expected to plead guilty to one count of conspiracy to defraud the United States and VW's U.S. customers and to violate the Clean Air Act as part of its involvement with VW's costly global scandal.

IAV is 50-percent owned by VW, Germany's No. 1 automaker. It is the only European car company scheduled to attend January's 2019 North American International Auto Show in Detroit, the final winter show before moving to June in 2020. IAV did not immediately respond to a request for comment.

The Justice Department said Tuesday IAV and VW knew the diesel-engine vehicles they engineered did not meet U.S. emissions standards. It "worked collaboratively to design, test, and implement cheating software to cheat the U.S. testing process, and IAV was aware that VW concealed material facts about its cheating from federal and state regulators and U.S. customers."

IAV will serve probation for two years and will be under an independent corporate compliance monitor which will oversee the company for two years as part of the plea agreement. The company has also agreed to cooperate with the Justice Department in its ongoing investigation of the emission-cheating scheme.

The $35 million fine was the maximum IAV could pay without jeopardizing continued viability, the Justice Department said.

Volkswagen admitted in 2015 to programming its diesel cars to trick emissions testers into believing the engines released far less pollution than they actually did. The so-called “defeat devices” allowed vehicles branded “Clean Diesel” to work properly during laboratory emissions testing. But in normal driving, the cars were found to emit up to 40 times more smog-causing nitrogen oxide than legally allowed.

In July 2016, Volkswagen reached a $14.7 billion civil agreement with the Environmental Protection Agency that calls for the automaker to spend $10 billion to buy back or repair about 475,000 2-liter diesel cars sold between 2009 and 2015. It also agreed to a $1.2 billion settlement with its American dealers.

Volkswagen CEO Martin Winterkorn was indicted in May on federal conspiracy charges to defraud the U.S., to commit wire fraud and to violate the Clean Air Act, dealing a fresh blow to the automaker's credibility and its bid to recover from the costly "Dieselgate" scheme.

The automaker pleaded guilty in March 2017 to three criminal charges related to its decade-long conspiracy to evade U.S. emission standards. The company was fined a record-setting $2.8 billion and faces three years of probation.


Twitter: @NoraNaughton