Volkswagen offers diesel owners $1,000 in gift cards and vouchers

DETROIT — Volkswagen is offering $1,000 in gift cards and vouchers as a goodwill gesture to owners of small diesel-powered cars involved in an emissions cheating scandal.

The offer announced Monday goes to owners of 482,000 cars in the US, many who are angry at the company because they paid extra for the cars to be environmentally sensitive without losing peppy acceleration.

VW is working on a fix for the cars, which are equipped with software that turns on pollution controls during government tests and turns them off while on the road. The US Environmental Protection Agency says the cars, with 2-liter four-cylinder diesel engines, emit 10 to 40 times the allowable amount of harmful nitrogen oxide while being driven.

The offer also includes free roadside assistance for the diesel vehicles for three years.

“We are working tirelessly to develop an approved remedy for affected vehicles,” said Michael Horn, VW’s US CEO, said in a statement. “In the meantime we are providing this goodwill package as a first step towards regaining our customers’ trust.”

VW said that its Audi luxury brand would launch the same program on Friday.

Meanwhile, Germany’s Transport Ministry said Monday that of the 2. 4 million vehicles being recalled for fixes in Germany, regulators “currently expect that approximately 540,000 will also need hardware changes” as well as software changes. It says Volkswagen will inform owners of the details.

The company is recalling 8.5 million 2009-2015 model year cars with the software across Europe, starting next year. It says about 11 million cars worldwide have the software.

Also Monday, Fitch, the credit rating agency, downgraded Volkswagen’s debt by two notches to reflect the potential financial costs of the scandal as well as the management problems that led to the crisis in the first place.

The downgrade follows a similar move by Moody’s last week. Fitch cited the “possibility of further problems still to be uncovered” by the company’s internal investigation as well as “relatively weak corporate governance.”

To get the gift cards and vouchers in the US, owners will not be required to sign anything giving up their right to sue Volkswagen or forcing them into arbitration, spokeswoman Jeannine Ginivan. “There are no strings attached,” she said.

The fix of the 2-liter diesels in the US could wind up hurting performance or perhaps fuel mileage, the two main reasons why people buy the diesels. More than 200 class-action lawsuits have been filed in the US against VW alleging that the scandal caused the diesel cars to drop in value.

Early in October, Kelley Blue Book said the average resale value of Volkswagens with two-liter diesel engines fell 13 percent since mid-September, when VW admitted it cheated on the tests.

Used car values often drop in the fall, since demand for them is stronger in the summer. But VW’s diesel decline is unusually large. The price of gas-powered Volkswagens dropped 2 percent in the same period.

Volkswagen already is offering $2,000 to current VW owners to trade in their cars for new vehicles, and the gift cards and vouchers would add $1,000 to that.

The scandal expanded last week, when the EPA accused VW of cheating with different software on larger six-cylinder diesels in about 10,000 vehicles. VW also acknowledged finding irregularities in carbon dioxide emissions in 800,000 other vehicles, all outside the US Some of those were powered by gasoline engines.

 

 

The scandal drew protests from the Greenpeace environmental group Monday outside the main entrance to VW’s headquarters in Wolfsburg, Germany. Protesters unfurled a banner reading “Das Problem” — a play on the carmaker’s marketing slogan “Das Auto.”

In addition to their banner, the Greenpeace protesters also held a “C” and a “2” on either side of the round VW logo at the factory entrance, spelling out “CO2.”

 

source: business.inquirer.net

Auto experts: Top managers probably knew of Volkswagen cheating

DETROIT — Auto industry insiders strongly suspect the emissions cheating scandal at Volkswagen is much wider and reaches higher up the corporate ladder than the company is letting on.

Volkswagen’s new CEO, Matthias Mueller, was quoted Wednesday as telling a German newspaper that the investigation so far has found that a few software developers tampered with the pollution controls on some of VW’s diesel engines. He said top executives would not have gotten involved in the software.

But industry experts and analysts say it’s hard to believe a few designers acted on their own to blatantly circumvent US emissions tests.

“You know that simple software guys would never have the courage or the authority to initiate the cheating,” said retired General Motors vice chairman Bob Lutz. “They would want someone senior to sign off on it.”

VW has admitted that 11 million of its diesel cars worldwide have software that turns pollution controls on when the vehicles are being tested on a treadmill-like device and shuts them off when the automobiles are on the road. The trick enables the cars to get better fuel mileage while spewing illegal levels of smog-causing exhaust.

Mueller didn’t rule out a wider circle of offenders and said VW is “now clarifying the responsibilities in detail.” The automaker has suspended four people responsible for engine development and hired a law firm to investigate.

On Thursday, VW’s top US executive, Michael Horn, is likely to face tough questioning on Capitol Hill about what he knew and when he knew it. VW said he will testify before Congress that he found out about the cheating software only a few weeks ago.

Experts say others in the company had to know about the cheating because the software controlled devices engineered by other departments. Those departments would surely have seen something amiss during testing of their own equipment.

Also, the cheating lasted for seven or eight years, and during that time, engineers and department heads would have changed jobs, widening the circle of knowledge, said Karl Brauer, senior analyst at Kelley Blue Book.

“I cannot envision how an eight-year policy to design the computers to act this way would be known by a few people at a low level and nobody else,” he said.

The cheating came as VW was aspiring to become the world’s top-selling automaker. Former employees said engineers were under pressure from management at the time to fix a problem that prevented VW from selling certain diesels in the US

“They don’t take no for an answer,” said one former employee who spoke on condition of anonymity for fear of retribution from the VW.

Also, when some of the emissions violations were brought to VW’s attention by regulators in the US in 2014, the automaker disputed the findings and questioned the test results, fighting the Environmental Protection Agency for more than a year.

“Someone had to approve it initially and keep approving it for seven or eight years, and then start lying about it more when it was discovered,” Brauer said.

A VW spokesman in the US wouldn’t comment Wednesday on the analysts’ statements.

Mueller also said in the interview in the daily Frankfurter Allgemeine Zeitung that a recall of 2.8 million cars with the software could start in Germany in January. That wouldn’t include cars in the US, where any fix still must be approved by the EPA and California regulators.

He said many of the cars being recalled won’t need much fixing, merely an adjustment to the software. Others, though, may require mechanical fixes such as new injectors or catalyzers.

“All the cars should be in order by the end of 2016,” he added.

He also said not all 11 million cars will need to be recalled.

Mueller, who became CEO less than two weeks ago when Martin Winterkorn resigned over the scandal, said the cars have different transmissions and country-specific designs. “So we don’t need three solutions, but thousands,” he said.

source: business.inquirer.net

Volkswagen CEO: ‘I am endlessly sorry’ brand is tarnished

DETROIT — Volkswagen AG’s smog-test scandal escalated Tuesday as the company acknowledged putting stealth software in millions of vehicles worldwide. The crisis has already cost VW more than 24 billion euros ($26 billion) in market value.

The world’s top-selling carmaker now admits that 11 million of its diesel vehicles contain software that evades emissions controls, far more than the 482,000 cars identified by the US Environmental Protection Agency as violating clean air laws.

Volkswagen set aside an initial 6.5 billion euros ($7.3 billion) to cover the fallout and “win back the trust” of customers. It also said this year’s profit projections will change, and warned that future costs remain undetermined.

CEO Martin Winterkorn apologized for the deception under his leadership and pledged a fast and thorough investigation, but gave no indication that he might resign. Meanwhile, Volkswagen’s ordinary shares fell another 20 percent Tuesday, to close at 111.20 euros.

“Millions of people across the world trust our brands, our cars and our technologies,” Winterkorn said Tuesday in a video message. “I am endlessly sorry that we have disappointed this trust. I apologize in every way to our customers, to authorities and the whole public for the wrongdoing.”

“We are asking, I am asking for your trust on our way forward,” he said.

That may be a tall order for people who bought “clean diesel” VWs believing they could get peppy rides but still be environmentally friendly.

“I thought I was doing something good and not something bad,” said Zandy Hartig, an actress in Los Angeles who bought a diesel-powered Jetta Sportswagen in 2013.

She plans to get it repaired, but says she’ll never buy a Volkswagen again. “It’s not a design flaw. It’s deliberately manipulating the system, and it’s quite evil,” Hartig said.

VW has yet to explain who installed the software, under what direction, and why.

“I do not have the answers to all the questions at this point myself, but we are in the process of clearing up the background relentlessly,” Winterkorn said.

The EPA said Friday that VW faces potential fines of $37,500 per vehicle, and that anyone found personally responsible is subject to $3,750 per violation.

In theory, the penalties could total $18 billion or more, although companies rarely pay maximum fines in the US

“I don’t think this is a life-threatening event, but it’s clear it’s going to be very expensive,” said Christian Stadler, who teaches strategic management at the Warwick Business School.

Volkswagen blamed unrelated issues for more than a year while the EPA and California regulators asked why its cars were running much dirtier on the road. The agencies refused to approve 2016 models without an answer.

Only then did VW acknowledge that software switches its engines to a cleaner mode during official emissions testing. The “defeat device” then switches off again, giving the cars more power while emitting as much as 40 times the legal pollution limit during actual driving, the EPA said.

“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 have totally screwed up,” the head of Volkswagen’s US division, Michael Horn, said Monday while unveiling a new Passat model in New York.

Across the sector, investors wondered how far this scandal could grow. Germany’s Daimler AG, the maker of Mercedes-Benz cars, was down 7 percent Tuesday, while BMW AG fell 6 percent. France’s Renault SA was 7.1 percent lower.

“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 U.K.-based branding consultant.

Volkswagen’s stock plunged again Tuesday after the company said similar “discrepancies” in Type EA 189 engines involve some 11 million vehicles worldwide — more than the 10 million or so cars it sold last year.

It also said new vehicles with EU 6 diesel engines currently on sale in the European Union comply with legal requirements and environmental standards.

The company hasn’t revealed the results of internal investigations, beyond announcing the much wider impact on Tuesday.

“I hope that the facts will be put on the table as quickly as possible,” German Chancellor Angela Merkel said in Berlin.

It may already be too late for people like Peggy Schaeffer, a librarian from Durham, North Carolina, who bought her diesel Jetta Sportwagen in 2010. She had liked Volkswagens, and “until this week, I was completely happy with it,” she said.

Now, she’s dismayed to know that during a recent cross-country trip, she was “polluting all the way.” And if Volkswagen’s eventual repair diminishes her car’s sportiness or fuel efficiency, she’s not sure she wants it.

“I really feel like I’ve been had. I’ve been hoodwinked. This is deliberate fraud and deceit,” she said.

Winterkorn became CEO in 2007. The software was installed starting with 2009 models. He was looking forward to getting a two-year contract extension, keeping him in charge through 2018, at the company’s regular board meeting Friday. Some board members reportedly planned a crisis meeting Wednesday.

Other authorities looking into VW’s actions include Germany, where the transport minister announced a commission of inquiry to determine whether VW’s diesel vehicles comply with German and European rules; the French government, which demanded that its automakers “ensure that no such actions are taking place in France,” the South Korean government and the European Commission. The US Justice Department is involved, and New York’s attorney general also announced a multi-state investigation on Tuesday.

source: business.inquirer.net