You are here

Volkswagen's US head to tell Congress there's no repairs schedule

VolksLogo081015.jpg
Volkswagen AG's top Us executive apologised and promised a full investigation into the automaker's emissions-cheating scandal, even as he stopped short of saying when consumers could expect repairs or what those fixes would do to their cars' performance.

[WASHINGTON] Volkswagen AG's top Us executive apologised and promised a full investigation into the automaker's emissions-cheating scandal, even as he stopped short of saying when consumers could expect repairs or what those fixes would do to their cars' performance.

"We are determined to make things right," Michael Horn, the president and chief executive officer of Volkswagen of America, said in written testimony prepared for a House Energy and Commerce investigations subcommittee hearing Thursday.

"This includes accepting the consequences of our acts, providing a remedy, and beginning to restore the trust of our customers, dealerships, employees, the regulators, and the American public." It will be the first public questioning in the US of a VW executive since the US Environmental Protection Agency and the California Air Resources Board announced their investigation Sept 18.

The scandal has rocked the world's second-largest automaker, leading to the resignation of its chief executive, Martin Winterkorn, and an announced charge of 6.5 billion euros (S$10.3 billion) for recall repair costs. Under the Clean Air Act, Volkswagen may be liable for fines as high as US$18 billion, based on maximum penalties per car involved.

Lawmakers examining the case want answers both from Volkswagen and the EPA.

"When the world was deceived by a company in such a flagrant way, it's discouraging," Representative Paul Tonko, a New York Democrat, said in an interview. "We have to get to the bottom of this. " EPA Burden Representative Marsha Blackburn, a Tennessee Republican, wonders whether EPA officials are so overburdened by enforcing environmental regulations that they're beginning to miss really important things.

"Being oblivious is a pretty big deal,"Mr Blackburn said in an interview.

Just how much money Volkswagen made by cheating on US emissions tests will be a factor in the penalties that will be assessed, EPA officials said. The agency intends "to assess the economic benefit to VW of noncompliance and pursue appropriate penalties," Christopher Grundler, director of EPA's Office of Air and Radiation, and Phillip Brooks, director of civil enforcement for air, said in a written statement.

"Remedies should match the wrongdoing," said Erik Gordon, a professor with the Ross School of Business at the University of Michigan. When US regulators lacked statutory authority to impose higher fines on carmakers, including General Motors Co over flawed ignition switches, "the small fines frustrated the public and Congress," he said.

The Wolfsburg, Germany-based automaker will ultimately face costs and lost revenue from its damaged image of more than 35 billion euros, according to an estimate by Warburg Research.

Volkswagen has withdrawn applications with the EPA for certification of its vehicles for the 2016 model year, Horn said in his submission for the House hearing. Horn learned in early 2014 that the carmaker might not be following emissions regulations on its diesel models, and the topic came up again later that year, when he was told VW's technical teams had a plan for fixing the cars involved, he said.

The company's initial disclosure to the California Air Resources Board that it had a "second calibration" governing engines during emissions tests on three different diesel engines occurred on July 8, according to the committee. It wasn't until Sept 3 that the company came clean with the EPA and CARB that this alternative mode was a "defeat device," shutting down pollution-control equipment as the cars drove in the real world.

Responsible parties will be identified and held accountable, and Volkswagen will revive its reputation, Mr Horn said. Technical teams are still working to identify solutions for consumers, he said. Company officials in Germany said Wednesday there will be multiple solutions for different engines and different countries, and that the work would continue at least through the end of 2016. German Transport Minister Alexander Dobrindt said in a video posted on his ministry's website that across the European Union, Volkswagen will need to exchange or rebuild parts for about 3.6 million engines.

US lawmakers have been hearing from consumers, whose resale values have plummeted, as well as car dealers, who are paying interest to hold vehicles they can't sell, said Representative Michael Burgess, a Texas Republican who sits on the Oversight and Investigations Subcommittee.

"The rules are set, and they're set for a reason," Mr Burgess said. "If you have an outlier in the marketplace, it's harmful at a lot of different levels."

BLOOMBERG