Reacting to pressure from German regulators, Volkswagen on Thursday recalled its entire fleet of rigged diesel cars in Europe, as the carmaker scrambles to come up with a remedy for its emissions cheating.
While a broad recall had been expected, the move reflects the difficulty that Volkswagen faces in fixing the 11 million vehicles worldwide that contain a so-called defeat device, which effectively lowered emissions for testing purposes. The company is indicating that the repairs may stretch beyond the end of 2016. Volkswagen had submitted a plan last week to German regulators, outlining repairs to three models of diesel engines that largely involved updating the vehicles’ software. But the country’s authorities considered the plan insufficient and on Thursday ordered the company to recall 2.4 million vehicles; Volkswagen later in the day adopted the German order more broadly, announcing a recall of 8.5 million diesel cars across Europe.
German regulators have given Volkswagen until the end of November to lay out the technical details of the remedy. Volkswagen said it would begin recalling and repairing the German cars in January. Regulators in the United States are waiting for the announcement of a detailed fix before ordering Volkswagen to recall its cars. Volkswagen officials have indicated that repairing the nearly half-million cars affected in the United States might require a more extensive solution because US standards on nitrogen oxide emissions are tougher than those in the European Union.
The Environment Protection Agency “will order a recall once the agency has done testing to confirm that Volkswagen’s proposed fix will be effective,” a spokeswoman for the regulator, Laura Allen, said in an email Thursday. “EPA will conduct our own testing to confirm this. Then we will order a recall.” Carl Tobias, a law professor at the University of Richmond, in Virginia, who has studied auto safety issues, said the German recall was a positive development.
“Rather than a proposal, generated by Volkswagen and subject to what they want to do, an authority is now in charge and will dictate what happens,” Tobias said in a telephone interview. “It still depends on how rigorous the authority will be with Volkswagen,” Tobias added. “VW has always been very cautious in terms of the timeline, and we won’t know for some time.” The scandal has dealt a substantial blow to a company once venerated for its engineering and quality.
Volkswagen holds near mythical status in the world of German business and is deeply entwined with the emotions of post-World War II recovery. The company is governed through a unique structure, involving a hybrid of control by members of the Porsche and Piech families, the state government of Lower Saxony and labor representatives. In the past, Volkswagen was dominated by strong personalities with a top-down style of decision making that some critics have said may have contributed to decisions that led to the scandal.
At a meeting with top managers in Leipzig on Thursday, Matthias Mueller, Volkswagen’s new chief executive, signaled a break with that style of management, saying that future decision making would be less centralized and that Volkswagen’s divisional managers would have more autonomy. “Volkswagen is not a one-man show,” Mueller said in an address. “It is definitely not my intention to intervene in decisions about products,” Mueller said, contrasting his predecessor, Martin Winterkorn, who liked to be involved in the minutiae of product development. “Whether a windshield sits at a one-degree angle higher or not, I’m not going to concern myself with that.” In the wake of the scandal, the company also appears to be shifting gears on strategy.
This week, Volkswagen said it would develop electric vehicles. In the past, the company was slow to adopt such offerings, despite a pledge by the German government to get a million electric cars on the road by 2020. Barbara Hendricks, the German minister for the environment, said in comments to ZDF public television early Thursday that the government should consider scrapping tax subsidies for diesel, shifting them instead to electric vehicles to encourage the more environmentally friendly technology.
She later backtracked, issuing a statement in which she warned against “demonizing” diesel technology, a warning that was also sounded by Germany’s transportation minister, Alexander Dobrindt. According to a study by Roland Berger consultants, more than 50% of all new passenger cars sold in Europe run on diesel, which is favored for its fuel economy, despite its higher emission of pollutants.
Volkswagen is now racing to deal with the fallout. The company faces a raft of investigations and lawsuits around the globe. Austria’s transportation ministry said Thursday that all Volkswagens with affected engines would be recalled in his country. Representatives of the Federal Motor Transport Authority, known by its German initials KBA, and other national authorities were in Brussels to brief the European Commission on investigations into the scandal in their markets.
“The KBA believes that the software used in the diesel engines constitutes an illegal defeat device,” said Dobrindt, adding that the mandatory recall would be overseen by the KBA. “The authority has demanded that Volkswagen remove the software and take all steps necessary to ensure that the emissions regulations are met.” Volkswagen has said it would set aside 6.5 billion euros to cover the costs of fixing the vehicles and indicated the costs could swell beyond that amount.
On Thursday, Volkswagen shares ended the day in Germany down 3.2%. In all, they have lost more than a quarter of their value since the deception was disclosed September 18. The ultimate fix for all the cars, the company has said, will be complicated, requiring different solutions for different markets. While vehicles with 1.2- and 2-liter engines appeared to need only replacement software to bring them back into compliance, the 1.6-liter models would most likely require additional hardware to remedy the problem. Such hardware, Dobrindt said, would not be ready until next September.
But he expressed confidence that Volkswagen would be able to meet the authority’s demands. “We have the impression that Volkswagen is technically capable of carrying out the technically necessary measures,” he said. Volkswagen said Thursday that it would directly contact and inform customers who have vehicles with an affected engine. The company pointed to a website set up this month where customers could enter a vehicle’s identification number to check whether it would be part of the recall.