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Automakers agree to clean up diesels to avoid ban in German cities

BERLIN -- Auto industry officials and politicians in Germany have agreed to clean up diesel vehicles through software updates as part of a rescue plan for avoiding diesel bans in cities, industry and government sources said on Friday. The costs of the rescue plan amount to under 2 billion ($2.33 billion) euros for cars in Germany, with the auto industry agreeing to shoulder the expense of about 100 euros per car, the sources said. After Volkswagen Group confessed to emissions-test cheating in 2015, the entire auto industry has come under scrutiny for producing nitrogen oxide emissions in diesel cars, which are blamed for causing respiratory disease. Audi, a division of Volkswagen Group, said it would update engine software on up to 850,000 diesel cars. The refit of six and eight cylinder engines will be free of charge for all customers, Audi said. The service will also be offered to Porsche- and Volkswagen- branded cars using the same six- and eight-cylinder engines, Audi said. Earlier this week, Porsche's CEO was quoted as saying the brand may abandon diesel engines as its electric cars go to market, and Mercedes announced a plan similar to Audi's, in which it will recall 3 million diesel cars in Germany for a $255 million engine software fix. Diesel cars from all domestic and foreign car brands that conform to the latest emissions standards, Euro-6 and Euro-5, will be updated, the sources said. The plan is set to be presented at the beginning of August. With the software updates, the auto industry is able to cut nitrogen oxide pollution by about 20 percent, the sources said. A committee will be set up to measure the impact of updating diesel cars on individual communities and cities, with a view to averting bans of diesel cars, the sources said. Auto industry executives and German Transport Minister Alexander Dobrindt are due to discuss diesel pollution at a summit on Aug. 2. Reporting by Arno SchuetzeRelated Video: Government/Legal Green Audi BMW Mercedes-Benz Porsche Volkswagen Diesel Vehicles dieselgate diesel emissions

VW budget sub-brand stuck in limbo over VW standards, costs

Reports in October 2012 claimed Volkswagen had begun investigating the creation of its own budget brand. This came after having failed to purchase Malaysian car company Proton or produce a meaningful partnership with Suzuki, and after watching Renault-Nissan make piles of euro on Dacia and plot the return of Datsun. For VW, more important than the question of what to call it was how to build it profitably and in a way that didn't damage the VW brand. According to a report in Autocar, a satisfactory answer still hasn't been found. The hurdle is how to hit "'necessary' quality and safety levels" at the price points needed to make the venture worthwhile. At the time of the 2012 report, German outlet Der Spiegel said VW was trying to get prices down to 6,000 to 8,000 euro ($7,784 to $10,379 US), about two thousand to four thousand euro under the price of the VW Up and in line with the cost of a 6,790-euro Dacia Sandero in Germany. In March 2013, VW announced, "We want to bring a true budget car to the market in China in the foreseeable future," the most concrete move in that direction after years of planning to make a decision. Working with local Chinese maker FAW, it was predicted that the vehicle in question would appear around 2016, but as of November last year a final vote on it needed to wait until this year because "We are still working on the cost side" and profit possibilities for a car that "has to be durable, it has to be precise, it has to be safe." Even Fiat, another automaker long considering a budget brand beneath its Fiat line-up, wasn't sure how to squeeze any extra money from lower-cost products but was sure that it couldn't be done by manufacturing in Europe. If VW hasn't yet made the math work with a joint venture in China, it will be interesting to see how it might build a European go-it-alone business case.

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.