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Taxpayers wasted $51 million on VW diesel credits

The scope of Volkswagen's diesel emission rules evasion continues to widen with 11 million vehicles now potentially affected around the world, and the company is setting aside over $7 billion to start paying for it all. However, the costs could go even deeper. In a piece that's well worth a read, an analysis by The LA Times finds that the government distributed as much as $51 million in green car subsidies to buyers of these models in 2009 – the first year of the dishonest engine management software. The short-term effects of this scandal on VW are already quite dire. On September 21, the company's stock fell over 20 percent at one point on the German exchange, ended down 17.8 percent that day, and have continued to tank. In addition, the Environmental Protection Agency has forced a stop-sale on 2015 and 2016 diesel models with the 2.0 TDI, and the agency has begun analyzing the 3.0-liter V6 TDI in the Audi A6, A7, A8, Q5, Q7, and Porsche Cayenne to look for similar issues. The Justice Department has also started a criminal investigation, and the automaker has instituted its own external probe, as well. The emissions irregularities were first discovered by researchers at West Virginia University and the International Council on Clean Transportation. The EPA and California Air Resources Board were eventually made aware and launched their own investigations.

Volkswagen's emissions deception brings more scrutiny to entire industry

Volkswagen's emissions deceptions have hurt the entire auto industry's credibility with federal regulators. Days after the world's largest automaker confessed to installing software that circumvents emissions standards on approximately a half-million diesel vehicles in the United States, a top federal safety official says the company's dishonesty will force government officials to view the entire auto industry with heightened skepticism. "Your first question has to be, 'How extensive is it through the whole industry?' You don't know if it's a unique case or if other people are doing it," said Mark Rosekind, administrator of the National Highway Traffic Safety Administration. "The unfortunate part is you're not going to worry about one person. It's extended to the entire industry. If they did it, someone else could do it." "They tell you one thing, you question it." - Mark Rosekind Rosekind's agency doesn't bear responsibility in investigating the emissions cheating. That falls to the Environmental Protection Agency, which served Volkswagen with a Notice of Violation on Friday that alleged the company's diesel vehicle equipped with 2.0-liter engines contained a defeat device that allowed the cars to detect when emissions testing was taking place. In normal driving situations, the cars spewed pollution at as much as 40 times allowable thresholds. But because of the emissions cheating, NHTSA wonders if the German automaker has been cutting corners on safety standards or disingenuous on safety-related discussions. Speaking at an auto-industry event in Novi, MI, on Tuesday, Rosekind indicated no information can now be taken at face value. He used the phrase "Question assumptions" several times in discussing the case. "Of course, question assumptions means, 'Is there some other safety element there that we're now going to have to investigate?" he said. As it did in the General Motors ignition-switch probe, the Department of Justice has initiated an investigation of Volkswagen and the House Committee on Energy and Commerce announced it will hold hearings on the cheating. For NHTSA, criminal cases complicate matters. The agency core function is to regulate safety, not conduct criminal investigations. But in the early going, their investigators may be the first ones to spot wrongdoing.

VW CEO Winterkorn issues video apology for diesel scandal

Amid rumors that he might step down from the automaker, Volkswagen CEO Martin Winterkorn has issued a video statement publicly apologizing for the company's diesel emissions scandal. The boss claims that he doesn't have the answers to all of the questions yet but promises a thorough investigation to makes things right. Multiple times in the speech, he asks forgiveness from customers all over the world and asks people not to blame all of the company's 600,000 employees for this lapse. At no point does Winterkorn mention resigning, though. You can watch the whole clip above, but it's in German, so turn on the subtitles. However, Winterkorn's future with VW isn't assured, and works council boss Bernd Osterloh appears ready to make some changes. "I can assure you that we will do everything possible in the supervisory board meetings this week to ensure the matter is cleared up quickly and that personnel consequences are drawn. And that will not just affect the rank and file, I can assure you," he said in a letter to Bild, according to Reuters. Earlier today, the automaker admitted that the same engine management software is in vehicles from other VW group brands, but it claims that the Type EA 189 engine is the only one with a deviation between test results and real-world numbers. That mill is installed in 11 million vehicles across the globe. As a start, VW is earmarking 6.5 billion euros ($7.3 billion at current rates) to service them. The actual costs could go much higher, though.

VW sets aside $7.3B war chest for diesel scandal fallout

The crisis enveloping Volkswagen AG, the world's top-selling carmaker, escalated Tuesday as the company issued a profit warning following a stunning admission that some 11 million of its diesel vehicles worldwide were fitted with software at the center of a US emissions scandal. The German company said it was setting aside around 6.5 billion euros ($7.3 billion) to cover the fallout from the scandal that has tarnished VW's reputation, raised questions over the future of CEO Martin Winterkorn and battered its share price. The reputational damage to Volkswagen is implicit in the market's response. Volkswagen's share price slid a further 16.2 percent Tuesday to a near four-year low of 112 euros. The fall comes on top of Monday's 17 percent decline. The shockwaves from the scandal enveloping Volkswagen were being felt far and wide across the sector as traders wondered who else may get embroiled. Germany's Daimler AG, the maker of Mercedes-Benz cars, was down 6.5 percent, while BMW AG fell 5.4 percent. France's Renault SA was seven percent lower. The scandal is hugely damaging to a business that relies heavily on a hard-won reputation for quality and trustworthiness. "Brands are all about trust and it takes years and years to develop. But in the space of 24 hours, Volkswagen has gone from one people could trust to one people don't know what to think of," said Nigel Currie, an independent UK-based sponsorship and branding consultant. The trigger to the company's market woes was last Friday's revelation from the US's Environmental Protection Agency that VW rigged nearly half a million cars to defeat US smog tests. The company then admitted that it intentionally installed software programmed to switch engines to a cleaner mode during official emissions testing. The software then switches off again, enabling cars to drive more powerfully on the road while emitting as much as 40 times the legal pollution limit. "We have totally screwed up." - Michael Horn "In my German words: we have totally screwed up," the head of Volkswagen's US division, Michael Horn, told an audience in New York on Monday. In its statement Tuesday, Volkswagen gave more details, admitting that there were "discrepancies" related to vehicles with Type EA 189 engines and involving some 11 million vehicles worldwide. The number of vehicles involved is more than the 10 million or so cars it sold in 2014.

How the Volkswagen cheating probe developed

Fallout from Volkswagen's revelation that it engaged in cheating on emissions testing continued Monday, with the company's stock falling more than 15 percent and a Congressional subcommittee announcing an investigation into the German auto giant's conduct. Both the Environmental Protection Agency and California Air Resources Board served Volkswagen with a Notice of Violation on Friday, saying the company intentionally circumvented emissions standards by using "defeat devices." Here's a look back at the agencies' emissions enforcement history and how the charges involving Volkswagen developed. August 1998 – Honda spends $267 million to settle charges it violated the Clean Air Act by disabling "misfire monitoring devices" installed on more than 1.6 million vehicles. Ford spends $7.8 million to settle a charge it violated the Clean Air Act by installing defeat devices on 60,000 Ford Econoline vans. May 2014 – Working with the International Council on Clean Transportation, researchers at West Virginia University find significantly higher in-use emissions from a 2012 Jetta and 2013 Passat and alert the EPA to their findings. November 3, 2014 – Korean automakers Hyundai and Kia agree to pay a $100 million fine for overstating the fuel economy on several of their models by as much as six miles per gallon. In announcing the fine, government officials sought to make an example of the two companies to deter further cheating. VW officials admit the vehicles were designed with a defeat device to "bypass, defeat and render inoperative elements of the vehicle emissions control systems." "This type of conduct quite simply will not be tolerated," said then-Attorney General Eric Holder. "And the Justice Department will never rest or waver in our determination to take action against any company that engages in such activities – whenever and wherever they are uncovered." December 2, 2014 – Following discussions that stemmed from West Virginia University's findings, Volkswagen agrees to initiate a recall of 500,000 cars. The company says a software update will fix the nitrous oxide trap technology and selective catalytic reduction technology causing the cars to miss emissions thresholds. May 6, 2015 – CARB wanted to see whether the software fix implemented by Volkswagen worked. Using portable emissions measurement systems, the regulatory officials found NOx emissions were still significantly higher than expected.

11M VW diesels affected, Porsche and Audi under investigation

Volkswagen's diesel scandal is growing exponentially larger. In a new statement, the company admits that 11 million vehicles worldwide might be equipped with software capable of evading emissions testing. In addition, the Environmental Protection Agency is beginning an investigation into the 3.0-liter V6 in Audi models and the Porsche Cayenne in the US, according to The Detroit News. The automaker claims that from its investigation so far, the "relevant engine management software is also installed in other Volkswagen Group vehicles with diesel engines." However, the company finds that the "noticeable deviation" in test results and real-world numbers only relates to the Type EA 189 powerplant. That still leaves 11 million vehicles potentially skirting emissions rules, though. Governments around the world have started taking a closer look into the company, too. In the US, the EPA has begun testing VW's V6 diesel because "they were certified well before we knew what we know now," Christopher Grundler, director of the EPA's Office of Transportation and Air Quality, said to The Detroit News. The agency has started checking diesels from other automakers to make sure they're meeting the rules, as well. Germany, the European Union, and South Korea have instituted similar investigations. In response, VW is setting aside 6.5 billion euros ($7.25 billion at current rates) to cover servicing all of these diesels. The company admits that the figure might have to be adjusted depending on what happens next. The money is being deducted from its third-quarter earnings. Related Video: VOLKSWAGEN AG HAS ISSUED THE FOLLOWING STATEMENT: Sep 22, 2015 Volkswagen is working at full speed to clarify irregularities concerning a particular software used in diesel engines. New vehicles from the Volkswagen Group with EU 6 diesel engines currently available in the European Union comply with legal requirements and environmental standards. The software in question does not affect handling, consumption or emissions. This gives clarity to customers and dealers. Further internal investigations conducted to date have established that the relevant engine management software is also installed in other Volkswagen Group vehicles with diesel engines. For the majority of these engines the software does not have any effect. Discrepancies relate to vehicles with Type EA 189 engines, involving some eleven million vehicles worldwide.

Volkswagen Passat gets classier styling, tech updates for 2016

Volkswagen revealed a snazzier-looking, better-equipped version of the Passat Monday evening, which will start at $23,260 when it goes on sale as a 2016 model late this fall. The refresh updates VW's midsize sedan, though the changes are mostly evolutionary, and they come as Volkswagen is mired in scandal following charges it cheated on EPA tests. The design features a new hood, grille, rear bumpers, and front fenders. It's also the first VW sedan to offer LED head- and taillights as an option, and the 2016 version is the first Passat to get an R-Line package, which includes black accents, 19-inch aluminum alloy wheels, and a custom front bumper. "We applied a progressive design strategy with the new Passat, giving the car a dynamic presence and a more sophisticated look," Klaus Bischoff, Volkswagen head of design, said in a statement. "We have integrated several new design elements, including a sculpted, domed hood that significantly sets the car apart from its predecessor." Inside, the cabin gets nicer materials, including chrome and piano-black trim, a new steering wheel, and available heated rear seats. VW's second-generation modular infotainment platform is standard, and it offers swiping and pinch-to-zoom features on most models. Volkswagen's Car-Net system is also available, which allows for smoother smartphone integration. The powertrain lineup carries over and is made up of the 1.8-liter turbo four-cylinder, 2.0-liter turbo diesel, and a 3.6-liter V6. It's unclear if the TDI model will be offered at launch in light of VW's recent diesel scandal. VOLKSWAGEN UNVEILS NEW 2016 PASSAT WITH STRIKING DESIGN, INNOVATIVE TECHNOLOGY AND ENHANCED VALUE The Chattanooga-built Passat raises the bar in the midsize segment, offering new styling inside and out as well as a host of new connectivity and driver assistance features • Striking new front and rear design • New interior with updated instrument panel and center stack for a more premium feel • Standard MIB II infotainment system includes USB connectivity • Available VW Car-Net® App-Connect supports smartphone integration with Apple CarPlay®, Android Auto™ and MirrorLink® • Energy-efficient LED headlights and taillights available for the first time on a VW sedan • New driver assistance systems are standard features on select trim levels • First-ever R-Line® trim for U.S.

VW's diesel problems could end in criminal prosecution

It's not just auto industry insiders who are re-evaluating their thoughts on VW's diesel line-up following last week's bombshell accusation that the German automaker willfully installed software in almost a half-million diesel vehicles sold in the US to get around government emissions tests. Things are moving fast in what is already being called "dieselgate," but here are some of the big news items that we've learned since VW CEO Martin Winterkorn issued an apology yesterday. The biggest news is that both the US and German governments are looking into criminal prosecutions. Here, the US Justice Department has started a criminal investigation and Germany said that its Federal Motor Transport Authority will get involved. When the full history about all of this is written, two key players will be John German and Peter Mock from the International Council on Clean Transportation. They were the researchers responsible for actually calculating the emissions, and thus discovered that what was coming out of the tailpipe and what VW was telling the EPA did not match up. Once the EPA understood what was going on, it forced VW to either explain things all of its 2016 models would not receive certification. Sales of all VW diesels in the US have indeed been stopped, and the EPA says it will take a closer look at all light-duty diesel vehicles in the US. The re-engineered 2016 Volkswagen Passat is being launched in New York today. Two senior Volkswagen executives who were supposed to attend the event - Heinz-Jakob Neusser, VW's board member in charge of technical development and Herbert Diess, chairman of the VW brand's management board - have cancelled. An Audi vehicle is among the VW Group's vehicles affected by this issue, the A3 TDI. Given that VW has admitted in some fashion to installing the "defeat device" to get around the emissions tests, Audi's slogan "Truth In Engineering" now sounds less than perfect. Yes, there is already talk of class-action lawsuits. Nothing official is out yet, but expect to hear more about this in the near future.

Which will Dieselgate hurt more, Volkswagen or US diesels?

The most damning response to the news Volkswagen skirted emissions regulations for its diesel models may have actually come from the Los Angeles Times. On Saturday, the Times published an editorial titled "Did Volkswagen cheat?" The answer was undoubtedly yes. When you can't drive down Santa Monica Boulevard without seeing an average of one VW TDI per block, the following words are pretty striking: "... Americans should be outraged at the company's cynical and deliberate efforts to violate one of this country's most important environmental laws." VW has successfully cultivated a strong, environmentally conscious reputation for its TDI Clean Diesel technology, especially in states where emissions are strictly controlled. A statement like that is like blood all over the opinion section of the Sunday paper. The effect on VW's business, even Germany's financial health, was already felt Monday when the company's shares plummeted 23 percent in morning trading. The statement on Sunday from VW CEO Dr. Martin Winterkorn says "trust" three times. That probably wasn't enough in nine sentences. Writers over the weekend have compared VW's crisis to one at General Motors 30 years ago, when it was the largest seller of diesel-powered passenger cars until warranty claims over an inadequate design and ill-informed technicians effectively pulled the plug on the technology at GM. In a sense, VW is in the same boat as GM because it has fired a huge blow into its own reputation and that of diesels in passenger cars. And just as automakers like Jaguar Land Rover, BMW and, ironically, GM, were getting comfortable with it again in the US. VW of America was already knee-deep in its other problems this year. Its core Jetta and Passat models are aging and it needs to wait more than a year for competitive SUVs that American buyers want. The TDIs were the only continuous bright spot in the line and on the sales charts. Even as fuel prices fell and buyers shunned hybrids, VW managed to succeed with diesels and show that Americans actually care about and accept the technology again. Fervent TDI supporters might actually lobby for that maximum $18 billion fine to VW. I've personally convinced a number of people to look at a TDI instead of a hybrid. Perhaps not so much for stop-and-go traffic, but I know buyers who liked the idea that a TDI drove like a normal car and wasn't packed with batteries.

How should Volkswagen deal with its diesel problems?

The hounds of hell are bearing down on Volkswagen in the wake of allegations of cheating on diesel emissions testing. In just a single day, Volkswagen's stock has dropped 23 percent and the German government has announced that it is going to investigate a far larger number of vehicles over emissions violations. The American storm is quickly becoming a global one. Volkswagen sells over a million diesel vehicles a year and also has more than 13 percent of the automotive market overall – it was the number one automaker in the world up until the scandal. Yet in a matter of hours, Volkswagen has also become a pariah with potential fines and recalls that may be dwarfed by how the alleged lies and deceit change how governments and consumers view the company. Consumers are really going to be the key to the company's survival. It's those consumers who are really going to be the key to the company's survival. Every single one of them now finds themselves with a product that was sold illegally and may not be registered until recall work is done. What's worse is that Volkswagen doesn't yet have a solution for the emissions issue to offer these customers. It should also be noted that this is not the first time Volkswagen has found itself in violation of EPA emission regulations. Volkswagen is in a world of trouble, so what now? As a car dealer and former financial analyst who took several companies public, I believe Volkswagen can and should consider three points of action that would make an enduring difference in the times to come. 1. Offer affected TDI owners a compelling reason to stay with the brand. Recall work and a cup of coffee at the dealership are not going to be enough to placate current owners. Volkswagen should provide compensation for customers at the earliest opportunity and offer some type of inducement that keeps them within the fold. This shouldn't be the industry's version of a Chuck E. Cheese coupon - a small discount on a new vehicle. Volkswagen needs to offer something along the lines of a strong warranty extension of the entire powertrain (not just the emissions system) or some type of valuable feature upgrade for these vehicles so that owners feel that they have been treated fairly. Perhaps a combination of a brand new navigation system, software upgrades for the infotainment components, or some type of basic free WiFi service would be a healthy act of generosity.