 "Engine drawbacks drove Volkswagen to fix tests")
Volkswagen began installing software devised to cheat on emissions tests in 2008 after realising that a new diesel engine, developed at great expense, could not meet pollution standards in the United States and other countries, people with knowledge of the automaker's internal inquiry said on Sunday.
Rather than stop production of the engine and throw out years of work and investment, managers decided to cheat, the people said, confirming a report in Bild am Sonntag, a German newspaper. They did not want to be identified because of the sensitivity of the issue.
It remained unclear who was responsible for the decision, which has created a crisis at the world's largest automaker. The deception will force the company to undertake costly repairs on as many as 11 million affected vehicles and has tarnished Germany's image as a bastion of engineering prowess.In late September, Volkswagen suspended three top managers who played prominent roles in engine development, but the carmaker has not publicly disclosed the reasons for the suspensions. "We are working intensively to clarify what occurred," a company spokesman said in a statement. "Thoroughness comes before speed. We will provide information as soon as we have facts."
Volkswagen is expected to disclose some of the findings from its internal inquiry this week. By showing that it is aggressively investigating what led to the fraud, the company may be seeking to limit further damage to its reputation and future car sales.
After interviewing engineers who participate in engine development, internal auditors have determined that the illegal software was installed beginning in 2008, according to the people familiar with the inquiry, which is still at a preliminary stage.
By then, Volkswagen had spent several years developing a new diesel engine line, known as the EA 189, which included both 1.6- and 2.0-litre versions, and was preparing for production. The EA 189 was one of the most important engines in the company, destined not only for millions of Volkswagen-brand cars but also for a wide variety of other brands from the parent Volkswagen Group, like Audi, Skoda and Seat, as well as some light utility vehicles.
Significantly, the engines were also scheduled to be used in Golf, Passat, Beetle and Jetta models that were to be sold in the United States as part of a push to market "clean diesel" - a concept promoted as a way for drivers to be environmentally responsible while enjoying high fuel economy and peppy performance.
But according to the internal inquiry, the engines proved unable to live up to that standard and meet air-quality emissions standards. Volkswagen's big bet on the future was poised to fail.
It was not yet clear how many countries' emissions standards the new motor would have been able to meet without cheating. But the United States, with its limits on diesel emissions that are much stricter than those of the European Union, was one of the most important.
Cars from the 2009 model year were the first to arrive in the United States with the new motors. By that point, it would have been a severe setback to cancel production and go back to the drawing board.
It remained unclear who made the decision to solve the emissions problem by installing software deliberately devised to cheat on emissions tests. The software could recognize when a car was undergoing emissions tests and set temporary pollution controls so that the vehicle would pass. During normal operation, the cars could emit as much as 40 times the allowed amount of nitrogen oxides, a class of harmful pollutants.
The recently suspended managers were all people in central decision-making roles. They are Ulrich Hackenberg, head of development for all Volkswagen Group brands, and previously head of development for Volkswagen-brand cars from 2007 to 2013; Heinz-Jakob Neusser, currently head of development for the Volkswagen brand; and Wolfgang Hatz, head of engines and transmissions development for all Volkswagen brands.
The three suspended executives could not be reached for comment.
A few years before discovering that the EA 189 engines could not satisfy pollution regulations, Volkswagen made a fateful decision not to use a more expensive diesel-emissions technology developed jointly with its rival Daimler, the maker of Mercedes-Benz cars. Instead, in 2007 Volkswagen announced that it would use its own method for controlling emissions of nitrogen oxides and other harmful pollutants. That system, when used on the EA 189 engines, proved inadequate for the task.
Even if no top executives ordered the use of the illegal software or knew about it, the latest revelations are likely to reinforce criticism of the company's high-pressure management methods.
Martin Winterkorn, the chief executive of Volkswagen who resigned last month, was known for setting extremely ambitious goals. In 2008, for instance, as the company's hopes were riding on the rollout of the EA 189 engine, he vowed to triple sales in the United States within a decade. Winterkorn, who has denied knowledge of the illegal software, also had a reputation for dealing harshly with subordinates who failed to meet their targets.
In Germany, where Volkswagen is the largest company by sales, the scandal has raised fears that there could be collateral damage to other carmakers and to the country's reputation for excellence in engineering.
Angela Merkel, the German chancellor, sought to calm those fears in an interview with Deutschlandfunk radio on Sunday. "I don't think that the reputation of German business, the trust in German business, is so badly shaken that we no longer qualify as a good place to do business," she said.
In the United States, almost all of the approximately 500,000 cars that are affected are Volkswagen-brand cars like the Passat, Golf, Jetta and Beetle that have two-litre diesel motors. About 14,000 Audi A3 diesels, beginning with the 2010 model year, are also affected, the company has said.
Analysts warn that the effect on Volkswagen's financial health could be far-reaching, easily exceeding the 6.5 billion euros, or about $7.3 billion, that the company has set aside so far to cover costs from the scandal.
Volkswagen will be forced to spend huge sums defending itself against a growing number of lawsuits by shareholders and disgruntled owners, as well as official investigations in the United States and other countries. And the company's credit rating could suffer, which would raise the cost for the company to borrow money.
Analysts at Fitch Ratings said last week that the crisis could even affect the ability of Volkswagen's finance unit to package car loans into securities that could be sold to investors. Investors might demand a higher interest rate if they believe that the vehicles used to secure the loans may lose value.
Although Volkswagen is profitable and has a large cash buffer, those costs could divert resources needed to develop new vehicles, which could eventually force the company to sell assets such as its truck-making units.
Many components of the two-litre motors came from Bosch, a company based in Stuttgart, Germany, while Continental, based in Hanover, Germany, supplied parts for 1.6-litre diesels. Both companies said it was up to Volkswagen to configure software used to manage engine functions.
"Software we delivered cannot be used to manipulate emissions test results," Continental said in a statement Sunday. The company provided fuel injectors, fuel pumps and equipment to manage the motor, but Volkswagen provided the specifications and was responsible for installing and configuring the software, Continental said.
Volkswagen has said it will unveil a technical solution for the affected vehicles on Wednesday, when the company's supervisory board is scheduled to hold an emergency meeting. But experts are skeptical that Volkswagen can find a way to make cars compliant without hurting fuel economy and performance.
"If they could have passed without cheating, they would have done so," Emmanuel Bulle, an auto analyst at Fitch Ratings, said during a conference call with customers on Friday.
©2015 The New York times News Service
