VW's recall plan approved

The German Federal Transport Safety Authority (KBA) on Wednesday cleared Volkswagen's plan to refit about 8.2 million diesel cars in Europe, with the embattled German carmaker saying the first recalls would likely begin as early as January.

KBA gave the green light to software and hardware upgrades to the 1.6-litre version of VW's EA 189 diesel engine, which regulators in the US and Europe had found to be containing a so-called cheat device aimed at masking a car's emissions. The 2-litre version of the motor would only require a software upgrade, KBA added.

During a presentation on Wednesday, VW engineers said mechanics would need to install a mesh called "flow transformer" near the air cleaner to ensure the diesel engine complies with EU emissions rules. Fitting the mesh would require "less than an hour of work," improving the measuring capability of the engine's air mass sensor which enables more efficient combustion, they added.

German automobile expert Ferdinand Dudenhöffer estimated the total costs of refitting VW's 8.2 million emissions-cheating cars in Europe to amount to "less than 500 million euros ($530 million)."

"This will make sure that VW returns to sound finances quicker than previously expected," he told German news agency DPA.

Financial buffer for US litigation

However, Dudenhöffer also said VW was still facing the "biggest bulk of financial risks" in the United States where about 420,000 3-litre VW diesel cars have been caught out containing cheating software.

Last week, VW submitted a proposed recall plan to the US Environmental Protection Agency (EPA) and the California Air Resource Board (CARB) as a possible first step towards ending the emissions problem. US regulators have threatened the carmaker with fines of up to $18 billion, in addition to a wave of litigation that could result in massive damage claims from US buyers.

Nevertheless, Chief Executive Matthias Müller told managers on Monday that the repairs were "technically and financially manageable."

"Our assumption that fundamental interferences with the engine are necessary have not come true," Müller said.

According to the VW CEO, the carmaker wouldn't lower planned provisions of 6.7 billion euros for the costs of repairing about 11 million diesel cars worldwide.

For that VW is also seeking as much as 20 billion euros in funding from banks to cope with the expected costs, which analysts say could top 40 billion euros including fines, legal claims and vehicle refits.

uhe/nz (dpa, AFP, Reuters)