Volkswagen faces major legal trouble in emissions scandal

28 Sep 2015 | Author: | No comments yet »

EU may change emissions tests laws.

The German carmaker named company veteran Matthias Mueller as new CEO on Friday in an attempt to get to grips with a crisis that its chairman described as “a moral and political disaster”.

Volkswagen ignored warnings from staff and a supplier years ago about the use of illegal tricks to defeat emissions tests, German media reported Sunday. The appointment came as Swiss authorities said they were suspending sales of Volkswagen brand diesel vehicles that could contain devices capable of cheating emissions tests, including Audi, Seat, and Skoda vehicles built between 2009 and 2014. The German weekly Bild am Sonntag reported that Volkswagen’s internal investigation found a 2007 letter from parts supplier Bosch warning VW not to use the software during regular operation.

The world’s biggest automaker is adding up the cost to its business and reputation of the biggest scandal in its 78-year history, having acknowledged installing software in diesel engines designed to hide their emissions of toxic gasses. It is facing an $18bn (£11.9bn) fine from US regulators, as well as lawsuits from customers and also investors, who saw 30 per cent of the value of their shares disappear last week. Separately, the Frankfurter Allgemeine Sonntagszeitung reported that a Volkswagen technician raised concerns about illegal practices in connection with emissions levels in 2011. Bozena Michalowska-Howells at Leigh Day criticised VW, whose statement on Friday she said “gave scant regard” to its millions of customers, adding that it focused solely on the new chief executive, Matthias Müller. The German automaker sparked global outrage last week when it admitted that 11 million of its diesel cars built since 2008 are fitted with so-called defeat devices that activate pollution controls during tests but covertly turn them off when the car is on the road.

The company’s internal investigation is likely to focus on how far up the chain of command were executives who were responsible for the cheating, and how long were they aware of it. Mueller pressed the board to move ahead with a reorganisation he helped devise before Volkswagen was caught up in an emissions-cheating scandal, as the new leader seeks to put his stamp on the company. They do not know whether the car they are driving is indeed emitting 40 times the legal emissions limit, as has been suggested, nor do they know whether their cars will be recalled to bring them into the line with EU regulations.” She added: “There is a woeful lack of clarity. A spokesman for Volkswagen declined to comment on the reports, saying that as a matter of principle the company wouldn’t comment on what he called “rumours and speculation.” “Volkswagen is working with all its strength to conduct a thorough and merciless investigation of this matter,” Andreas Lampersbach said in an email. Volkswagen said on Friday that more authority will be given to individual brands and regions, a departure from the centralised structures that kept key decisions in Wolfsburg and the CEO’s inner circle.

VW would hold those responsible for rigging the emissions test to account and discuss technical solutions for the problem with authorities, he said, citing a statement by the company’s supervisory board. “Afterward we will provide a timetable to modify the vehicles of affected customers. The spiraling scandal has badly tarnished VW’s name, left it exposed to up to $18 billion in US fines, and wiped out a third off its stock market value in a week. Regulators must also make urgent measures to ensure that deception on this scale could never happen again.” She urged the UK Government to “take action to prevent further damage to air quality”. This will take several weeks.” Italian media reported on Sunday that Volkswagen’s Italian unit has sent a letter to all of its dealers to stop selling cars that have the affected diesel engine.

Panmure Gordon’s veteran commentator David Buik described the appointment of Mr Müller, formerly head of Porsche, which is owned by VW, as “corporate insanity”. “The public is not being treated to the respect it deserves with an appointment that cannot be perceived as fully transparent,” he said. According to the news agency ANSA, the letter said it was “a precautionary measure.” The daily Corriere della Sera said the move would affect 40,000 vehicles and deal a blow to car dealers, a sector that has been losing money for 10 years and finally seemed to be emerging from the crisis.

German environment minister Barbara Hendricks said the European Commission and member states were considering stricter rules. “We are working on new, honest measuring methods in Brussels,” she told Handelsblatt newspaper. “We can’t just rely on tests in the lab,” she said, adding future tests should focus more on normal road conditions. Bild said Martin Winterkorn, who quit as Volkswagen CEO last week, was demanding his salary for the rest of his contract through the end of next year but the board did not want to pay it.

Chancellor Angela Merkel’s chief of staff, Peter Altmaier, called on Volkswagen to take action to restore public trust in the industry. “We need a guarantee that cars of German manufacturers are in line with the norms, without manipulation,” he told Der Tagesspiegel . The transport ministry said the KBA had written to VW demanding it “commit to concrete steps and a timetable” to ensure its cars in Germany meet requirements. Volkswagen and other European manufacturers have promoted “clean diesel” technology, benefiting from diesel’s fuel economy but meeting stringent tests for emissions of toxins. But the suggestion that this was achieved by cheating on tests could affect the viability of the entire diesel sector and the fate of companies that have bet on it.

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