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VW chief 'told about emissions software months before scandal'

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Der Spiegel says Mr Diess was present at a meeting on July 27, 2015, when senior engineers and executives discussed how to deal with US regulators.

Frankfurt

VOLKSWAGEN chief executive Herbert Diess was told about the existence of cheating software in cars two months before regulators blew the whistle on a multi-billion exhaust emissions scandal, German magazine Der Spiegel said.

The report, based on recently unsealed documents from the Braunschweig prosecutor's office, raises questions about whether VW informed investors in a timely manner about the scope of a scandal which it said has cost it more than US$27 billion in penalties and fines.

Volkswagen's senior management, which has denied wrongdoing, is being investigated by prosecutors in Braunschweig, near where Volkswagen is headquartered, to see whether the company violated disclosure rules.

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US regulators exposed VW's cheating on Sept 18, 2015. Responding to the magazine report, the carmaker reiterated on Saturday that the management board had not violated its disclosure duties, and had decided to not inform investors earlier because they had failed to grasp the scope of the potential fines and penalties.

Citing documents unsealed by the Braunschweig prosecutor's office, Der Spiegel said Mr Diess was present at a meeting on July 27, 2015, when senior engineers and executives discussed how to deal with US regulators, who were threatening to ban VW cars because of excessive pollution levels.

Mr Diess, who was VW's brand chief at the time, became chief executive of Volkswagen Group in April this year. Volkswagen also owns the Scania, Skoda, Audi, Porsche, Bentley, Bugatti, Lamborghini and Ducati brands.

The US Environmental Protection Agency (EPA) had found unusually high pollution levels in VW's vehicles and was threatening to withhold road certification for new cars until VW explained why pollution levels were too high.

Mr Diess, who had defected from BMW to become head of the VW brand on July 1, 2015, joined the July 27 meeting with Volkswagen's then CEO Martin Winterkorn to discuss how to convince regulators that VW's cars could be sold, a VW defence document filed with a court in Braunschweig in February, shows.

Volkswagen on Saturday said both Mr Winterkorn and Mr Diess declined to comment given the ongoing proceedings. A spokesman for Mr Winterkorn declined to comment on Saturday. Mr Winterkorn's lawyer Felix Doerr could not be reached for comment.

Following this meeting, Mr Winterkorn asked Mr Diess whether BMW too had installed "defeat devices" in its cars, Der Spiegel said.

In the United States, legal engine management software is described as an "auxiliary emissions device" while the term "defeat device" is used to describe only illegal software.

Mr Diess is said to have answered that BMW had not made use of such software, Der Spiegel said.

Volkswagen said on Saturday: "The contents of the discussion, where Martin Winterkorn and Herbert Diess were present, cannot be fully reconstructed, because the recollections of the people who were present partially deviate."

Volkswagen further said it was the task of authorities and courts to evaluate the conflicting statements and to assess whether individual witnesses were credible. Mr Diess and Mr Winterkorn left the July 27 meeting taking a presentation with them, Der Spiegel further said.

A VW employee intervened and cautioned the managers that it would be better if they were not in possession of the presentation, Der Spiegel said.

Volkswagen said on Saturday the purpose of the July 27 meeting was not to discuss whether Volkswagen had broken US law, but how to resolve the issue of whether new models would be given regulatory clearance. Volkswagen argued that it had struggled to understand whether its software was in fact illegal, the defence document filed with the Braunschweig court shows.

On July 31, 2015 Volkswagen hired a law firm to help the company understand its regulatory troubles, and lawyers were unsure whether the software would be deemed an illegal "defeat device" in the United States, VW said in the court filing.

The court filing further said that Hans Dieter Poetsch, Volkswagen's finance chief at the time, on Sept 14, 2015 believed the potential financial risk from regulatory penalties tied to emissions would be around 150 million euros (S$235 million).

Mr Poetsch is now Volkswagen's chairman. Volkswagen on Saturday reiterated that it had not violated disclosure rules and had informed investors in a timely manner about the financial scope of the scandal when it published an "ad hoc" disclosure notice on Sept. 22, 2015. REUTERS