VW fix manageable

On Monday in Wolfsburg, the birthplace and headquarters of Volkswagen Group, its new CEO, Matthias Müller, told a meeting of about a thousand of the company's ranking managers that the company would be able to deal with the financial and technical efforts and expenditures needed to resolve the company's diesel emissions scandal.

The challenges were "technically and financially manageable," Müller told the assembled leaders, according to excerpts of the CEO's speaking notes.

The scam resulted when engine-regulating software recognized when a car was being emissions-tested, and changed the engine's behavior to generate lower emissions - and then changed to a different mode when being normally driven. The reason for the scam was that engine performance and fuel efficiency was better with the pollution-reducing engine mode switched off.

The result: Emissions of nitrogen oxides (NOx) from VW diesel vehicles was far higher than the maximum allowed by regulators in reality, though the stationary emissions tests done in laboratories showed emissions as being well within the regulatory limits. Serious health impacts from NOx pollution in urban areas can be assumed to have resulted.

Technical fixes mostly approved

No major modifications of engine hardware would be necessary to fix the emissions scam, the company determined. The federal motor vehicle bureau has ordered VW to recall 2.4 million cars in Germany starting early 2016. In Europe as a whole, 8.5 million Volkswagens will be recalled for fixes; 11 million cars are affected in total world-wide. Müller said that regulators had already approved proposed technical fixes for 90 percent of the affected VWs in Europe.

Different models are variously affected. According to the VW CEO, for 540,000 cars with 1.6 liter diesel engines, two fixes would be necessary: A software change to remove the emissions-scamming engine-regulation software, and a "relatively simple" hardware change involving an air filter cassette. VWs with 2.0 liter engines, by contrast, would only need a software upgrade.

For engines with 1.2 liter engines, the company would present a proposed fix by the end of November, Müller said.

Heavy costs

Another scandal was recently uncovered. It has emerged that the company had falsified results of CO2 emissions tests to circumvent regulations aimed at forcing car fleets to reduce their total greenhouse gas emissions. These falsifications affect some 800,000 of the company's cars. It's not clear that any technical solution exists for this problem - but resolving it in legal terms will cost the company serious money. So far, it has set aside two billion euros to deal with claims resulting from the CO2 emissions scam, and 6.7 billion euros for the costs of the recalls necessary to fix cars affected by the NOx emissions cheating scam.

These two cost items are not the only ones VW is facing, however. While the total number of cars affected by the emissions scam is lower in the US, the US Environmental Protection Agency is likely to levy stiff fines, and damage claims from class action lawsuits launched by lawyers for American VW owners are also in the works.

The company has already offered rebates and freebies to clients along with apologies.

Whodunnit?

Müller told the managers assembled at Wolfsburg that it would take time to identify who had been responsible for the scams. An internal investigation had seized numerous computers and smartphones and Gigabytes of data.

In addition, "conversations are being had, clues followed up, and meeting protocols reviewed," Müller said, according to a document with excerpts from his presentation to the managers. It would take some months before conclusions could be reached on precisely how the scams had been developed and who was involved. However, an interim report would be made public by mid-December.

2025 Strategy

Müller also spoke to the managers about the company's future direction. He said different corporate brands and various regional subsidiaries would be given more responsibilities in future - a partial decentralization was in the works. Under Müller's predecessor, Martin Winterkorn, the company had been run in an extremely centralized and hierarchical manner.

Volkswagen Group has twelve vehicle brands in its portfolio, including Volkswagen, Audi, Porsche, Seat, Skoda, Bentley, Bugatti, Lamborghini, Ducati, VW Trucks, Scania and MAN.

VW had already announced a few weeks ago that the company would shift to a greater focus on electromobility and digital connectivity for its automobiles in future.

"If you like, we need a bit more Silicon Valley, paired with the competencies [at car-making] we have in Wolfsburg, Ingolstadt, Stuttgart and our other production centers," Müller said. The core elements of a "2025 Strategy" are under development and will be presented around the middle of next year, he added.

nz / uhe (dpa, Reuters)