VW Boss: Sorry For “Breaching Trust”

VW Boss: Sorry For “Breaching Trust”

The chief executive of Volkswagen apologised Sunday for what he said was a breach of trust that resulted in the company’s being accused by US authorities of illegally installing software in its diesel-power cars to evade standards for reducing smog.

“I personally am deeply sorry that we have broken the trust of our customers and the public,” Martin Winterkorn, the chief executive of the German automaker, said in a statement. The Environmental Protection Agency has ordered Volkswagen to recall nearly half a million vehicles, and the company could face billions of dollars in fines. Winterkorn said the company would “cooperate fully” with the authorities and order its own independent investigation into the accusations.

In his statement, Winterkorn did not contest assertions by the EPA that Volkswagen sold cars equipped with software that could detect when periodic state government emissions testing was taking place.

Only during such tests are the cars’ full emissions control systems turned on. During normal driving situations, the controls are turned off, allowing the cars to spew as much as 40 times the pollution allowed under the Clean Air Act, the EPA said. Volkswagen was going through a difficult period even before the accusations became public Friday. Winterkorn recently survived a power struggle with the chairman of Volkswagen’s supervisory board, Ferdinand Piech, a scion of the Porsche family who dominated the company for more than two decades before resigning in April.

After Piech’s departure, some analysts have raised questions about whether Winterkorn would be strong enough to hold together the sprawling Volkswagen empire, which also includes Audi and Bentley luxury cars, Porsche and Lamborghini sports cars, Scania and MAN heavy trucks, and Ducati motorcycles.

Although Volkswagen recently surpassed Toyota as the world’s biggest automaker measured by the number of cars sold, it is significantly less profitable than its Japanese rival and far weaker in the US market. A push by Volkswagen to increase sales in the United States, which included building a factory in Chattanooga, Tennessee, to produce Passat sedans, has fallen short.

“For Volkswagen, it’s a huge scandal,” said Ferdinand Dudenhoeffer, a professor at the University of Duisburg-Essen who follows the automobile industry. “The timing is extremely unfortunate.” Dudenhoeffer said the case could damage all German automakers, which have tried to build acceptance in the United States for diesel engines, a sector in which they believe they have a technological lead.

Until recently, Dudenhoeffer said, the United States applied stricter standards to diesel engines than those applied by European regulators. But the European authorities, concerned about the health effects of diesel pollution, have tightened standards, prompting complaints from the auto industry. Dudenhoeffer said that as a result of the EPA action, Winterkorn could come under pressure to resign. This month, a subcommittee of the Volkswagen supervisory board nominated Hans Dieter Poetsch, the company’s chief financial officer, to succeed Piech as chairman of the panel, which oversees the management board and approves major strategic decisions.

The nomination, which must be approved by the full supervisory board, was seen by some as a snub to Winterkorn because it meant he would report to someone he had previously outranked.

“Winterkorn was already damaged,” Dudenhoeffer said. “Now there is an accusation of illegal behavior. This story is not over.” EPA officials issued the car company a notice of violation and said it had admitted to the use of a defeat device. The recall involves four-cylinder Volkswagen and Audi vehicles from the model years 2009 to 2015. The software was designed to conceal the cars’ emission of nitrogen oxide, a pollutant that contributes to the creation of ozone and smog, which are linked to a range of health problems, including asthma attacks, other respiratory diseases and premature death.

Disengaging the pollution controls on a diesel-fueled car can yield better performance, including increased torque and acceleration. California has issued a separate notice of violation to the company. California, the EPA and the Justice Department are working together on an investigation of the allegations.

Over the next year, EPA officials said, owners of the affected vehicles should expect to receive recall notices from Volkswagen, including information about how to get their cars repaired at no cost to them. The recall covers roughly 482,000 diesel passenger cars sold in the United States since 2009. Affected diesel models include the 2009-15 Volkswagen Jetta, 2009-15 Beetle, 2009-15 Golf, 2014-15 Passat and 2009-15 Audi A3. The US investigation could ultimately result in fines or penalties for the company. Under the terms of the Clean Air Act, the Justice Department could impose fines of as much as $18 billion.

The notice of violation came days after the company trumpeted plans at the Frankfurt International Motor Show to introduce 20 plug-in hybrid or all-electric vehicles by 2020 as part of a campaign to reduce vehicle emissions. Winterkorn said in his statement Sunday that Volkswagen would “do everything necessary in order to reverse the damage this has caused.” “This matter has first priority for me, personally,” he said, “and for our entire board of management.”