VW Diesel Scandal

Volkswagen has encountered another hefty toll on the dirty diesel highway, agreeing to pay $1 billion to fix or buy back about 80,000 VW, Audi, and Porsche vehicles equipped with 3.0-liter TDI diesel engines.

The agreement settles suits brought by federal and California regulators. So far, VW has tossed about $17.5 billion into the coin basket and it still faces billions of dollars in fines and expenses as it tries to settle state and federal damage claims and criminal investigations.

Besides the buybacks, VW will help fund electric vehicle programs in California. Volkswagen's U.S. chief, Hinrick Woebcken, said it was "an important step forward in our efforts to make things right for our customers."

The latest settlement was announced Tuesday at a status conference by U.S. District Judge Charles Breyer in San Francisco. Breyer last year signed off on a $15 billion settlement under which VW buys back or tries to fix about 475,000 cars with 2.0-liter diesel engines.

“We are pleased to be moving forward on an agreement in principle to compensate consumers who purchased affected Volkswagen and Audi 3.0 liter vehicles and look forward to resolving the final details," said Federal Trade Commission Chairwoman Edith Ramirez in a prepared statement. "The FTC, with its partners, secured $10 billion in compensation for the vast majority of consumers harmed by Volkswagen’s deceptive advertising earlier this year, and today’s agreement will provide redress for a smaller but no less important group of consumers who were not part of the original settlement."

What to do

Details of the latest settlement have not yet been released. Owners of the affected vehicles should wait until the court approves a final settlement. Vehicle owners and lessees can also obtain information about their options at: www.VWCourtSettlement.com and www.AudiCourtSettlement.com.

“As reported today by Judge Breyer, we have reached an agreement-in-principle with Volkswagen on substantial aspects of relief for 3.0-liter TDI Generation 1 and Generation 2 class members, and are working to resolve remaining issues. We will have no further comment, as the Court has instructed the parties that its confidentiality order still applies,” said Elizabeth Cabraser, court-appointed Lead Counsel for the Plaintiffs’ Steering Committee in an emailed statement.

Earlier this week, VW agreed to pay about C$2.1 billion to buy back polluting VWs in Canada. VW said today that German regulators had approved the company's plan to fix VW, Audi, Skoda and Seat cars sold across the European Union, Automotive News reported.

In yet another development, Robert Bosch GmbH, the company that produced the software used in the polluting diesels, has reportedly agreed to pay more than $300 million to settle a class action lawsuit filed by U.S. diesel owners, according to a Reuters report. 

U.S. consumers have expressed their fair share of outrage over Volkswagen’s emissions scandal. Since last September, when news first broke on the defeat devices, the company has faced a barrage of litigation from all sides.

In October, a court approved the company’s $15 billion settlement in the U.S. that covered consumers who bought or leased Volkswagen or Audi 2.0-liter TDI “clean diesel” cars. While the U.S. is obviously not the only country that Volkswagen must worry about when it comes to making reparations, the company made progress by recently reaching an agreement with our neighbors to the north.

Reuters reports that Volkswagen has agreed to a C$2.1 billion agreement with Canadian diesel owners. The deal, which was struck on Monday, will buy back approximately 105,000 polluting diesel vehicles in the country.

Additionally, Volkswagen will pay a C$15 million civil administrative monetary penalty connected to the buyback. Approval hearings for the full deal are scheduled to be held in two Canadian courts in March. Reports suggest that most owners of affected vehicles should receive anywhere from C$5,100 to C$5,950 in compensation on top of the estimated value of their vehicle if they choose to turn it in.

“Volkswagen’s primary goal has always been to ensure our Canadian customers are treated fairly, and we believe that this proposed resolution achieves this aim,” said Maria Strenstroem, CEO and President of Volkswagen Group Canada.

Volkswagen is expected to announce a deal in the near future that also addresses 80,000 polluting 3.0-liter vehicles in the U.S., with experts saying that the company may incur an additional $200 million in fines based on the estimated amount of diesel pollution. That’s a small drop in the bucket, though, considering that the company may face billions in fines going forward if it is found guilty in federal and state investigations. 

A federal court judge today approved the $15 billion settlement between Volkswagen and consumers who owned or leased a Volkswagen or Audi 2.0-liter TDI "clean diesel" car. It's the largest consumer class action settlement in U.S. history.

In most cases the owners of VW and Audi diesel cars fitted with illegal emissions defeat devices will receive between $12,500 and $44,000 each, depending on the model, year, mileage, and trim of the car, as well as where the owner lives.

The Federal Trade Commission today issued a new consumer blog post, VW Buybacks and Lease Terminations to Begin, which provides background information on the settlement order, along with detailed instructions for affected owners regarding how and where to file a claim, and the claim-processing timetable. It also tells consumers how and where they can pick up their buyback check, specifying that the checks do not have to be used to buy a new Volkswagen.

“The settlement in its current form is fair, adequate, and reasonable and is in the best interest of Class Members. Benefits under the Settlement shall immediately be made available to Class Members,” Judge Charles R. Breyer said.

The settlement offers eligible VW owners and lessees the option of a buyback, to have their car fixed, or the option to wait and see what each owner believes is best for their situation.

Starting today, Volkswagen will begin processing claims so that consumers can participate in the settlement program and receive compensation. The compensation is free of attorneys’ fees and taxes and also takes into account insurance paid for the affected vehicles.

Buybacks and lease terminations should begin in November. It's not yet known when or if federal and state agencies will approve a modification that brings the cars into compliance with emission standards. The settlement provides that if a modification is not approved by the court and environmental agencies after 12 months, VW must buy back the vehicles. 

Consumer options

“This settlement is all about giving the consumer options while ensuring Volkswagen does its part to remedy its harm to the environment as well as fairly compensate those impacted,” said Joe Rice, a South Carolina attorney who was one of the lawyers negotiating the settlement. “Speed was critical in developing these options. ... The faster we are able to help consumers get the assistance they need, the better job we have done on their behalf."

A resolution must still be reached for consumers who bought or leased a 3.0-liter diesel-powered VW, Audi, or Porsche. 

The total settlement is $14.7 billion dollars, with $10 billion allocated for consumers and $4.7 billion for environmental restitution.

More action needed

While applauding the settlement, some critics said more needs to be done.

“It is great news that VW diesel owners can now be reimbursed, and that Volkswagen must begin to repair the environmental damage their emissions deception caused," said Center for Auto Safety staff attorney Michael Brooks but he said criminal charges are needed to get industry's attention.

"Automakers will not change their illegal behavior unless the government pursues significant criminal penalties against executives who take or condone such actions.  We look forward to news of federal criminal charges against the VW executives who participated in this fraud on the American public,” Brooks said.

Safe Climate Campaign Director Dan Becker said the government "did a good job preventing further harm from VW’s diesel fraud."

"Most heavily polluting diesels will be removed from the road and cannot be resold unless fixed. Other automakers must learn from this scandal that they dare not disable pollution controls, lie to the government or fleece consumers. Those lessons will be reinforced when the government brings criminal charges against VW officals who perpetrated this fraud,” Becker said.

The death penalty is rarely used these days because it is seen as inhumane and also because it shuts down any opportunity for rehabilitation, which is supposed to be the goal of the criminal justice system.

The U.S. Justice Department is now wrestling with a similar dilemma in the case of Volkswagen AG, caught cheating on the emissions produced by its "clean" TDI diesels.

VW has already agreed to pay more than $16 billion in civil penalties but still faces criminal charges that could be so severe they would put the company out of business. In a Bloomberg report, U.S. Justice Department officials are said to be considering taking the automakers' survival into consideration when settling on a recommended penalty.

It's not just Volkswagen that is in trouble. Deutsche Bank is also negotating to settle charges growing out of its mortgage securities business. Together the two companies account for more than 320,000 German jobs. Putting them both out of business would be harmful to U.S.-German relations and would affect thousands of American jobs as well.

No one is speaking on the record, but it is known that the Justice Department is hoping to settle the matter by January 2017. Assuming VW's business holds up over the next few months, it's possible it could be hit with a whopping fine and survive the blow. The company currently has about $32 billion in net liquidity, according to Bloomberg

Audi feeling the heat

While VW waits for the Justice Department's hammer to fall, it's also facing the specter that the fall-out from the diesel scandal is beginning to affect Audi, VW's cash cow.

Audi's development chief, Stefan Knirsch, resigned earlier this week after an investigation found he knew about the emissions deception when he took the job. 

Audi has been largely spared so far, and its sales remain robust in the United States and elsewhere. However, critics are raising questions about the luxury brand's potential role in the scandal. It is usually seen as playing an important role in developing technology that filters down to VW's mass-market brands, and the last two VW CEOs -- Martin Winterkorn and Ferdinand Piech -- both ran Audi before taking over the parent company.

German newspaper reports last week said that some Audi executives knew about the emissions cheating for nearly a decade. The engine control software at the heart of the scandal was developed at Audi in the 1990s as a way to reduce diesel engine noise. 

A Volkswagen engineer pleaded guility today to his role in the Volkswagen "dieselgate" scandal and admitted that he and other VW employees continued to lie to federal and California officials even after they had opened an investigation into the company's deceptive practices.

James Robert Liang, 62, of Newbury Park, Calif., pleaded guilty today to one count of conspiracy to defraud the United States, to commit wire fraud and to violate the Clean Air Act, and pledged in a plea agreement that he will cooperate with the government in its continuing investigation.

Volkswagen has agreed a $15 billion civil settlement that includes an agreement to buy back or try to repair about 475,000 of the TDI diesel-powerd cars. So far, about 210,000 owners of the affected cars have opted to take the cash. 

Owners will get their car's market value prior to the time the scandal was made public and will also get an extra $5,100 to $10,000, depending on the model, as compensation for their time and trouble.

Although VW has settled many of the civil claims against it, it and its employees are still facing possible criminal prosecution, and now that he has agreed to cooperate, Liang is seen as a key witness in future legal actions.

Secretly indicted

Liang was indicted by a federal grand jury in June but the indictment was not revealed until Liang entered his plea today. The case has been assigned to U.S. District Judge Sean F. Cox of the Eastern District of Michigan. 

According to the plea agreement, from 1983 until May 2008, Liang was an employee of Volkswagen, working in its diesel development department in Wolfsburg, Germany. 

Liang admitted that beginning in about 2006, he and his co-conspirators started to design a new “EA 189” diesel engine for sale in the United States. According to Liang’s admissions, when he and his co-conspirators realized that they could not design a diesel engine that would meet the stricter U.S. emissions standards, they designed software that would deceive emissions testing equipment.

The software -- referred to in court documents as a "defeat device" -- recognizes when a vehicle is undergoing standard U.S. emissions testing on a dynamometer and turns on equipment that brings emissions into legal limits. The rest of the time, emissions are allowed to reach as much as 40 times the legal limit.

"Diesel competence"

In May 2008, Liang moved to the United States to assist in the launch of VW’s new “clean diesel” vehicles in the U.S. market, according to the plea agreement.  While working at VW’s testing facility in Oxnard, he held the title of Leader of Diesel Competence.

According to the plea agreement, VW employees met with the EPA and the California Air Resources Board (CARB) to seek the certifications required to sell each model year of its vehicles to U.S. customers. 

Liang admitted that during some of these meetings, which he personally attended, his co-conspirators misrepresented that VW diesel vehicles complied with U.S. emissions standards and hid the existence of the defeat device from U.S. regulators.

Liang admitted that he and his co-conspirators knew that VW marketed its diesel vehicles to the U.S. public as “clean diesel” and knew that these claims were false. 

Liang also admitted that he helped his co-conspirators continued to lie to the EPA, CARB and VW customers even after the regulatory agencies started raising questions about the vehicles’ on-road performance following an independent study commissioned by the International Council on Clean Transportation, which showed that the diesel vehicles’ emissions on the road were up to 40 times higher than shown on the dynamometer.

Consumer Reports magazine thinks owners of Volkswagen diesels aren't getting enough compensation for the damage done to their car's resale value by VW's deceptive emissions strategies.

The non-profit magazine also says VW owners who agree to have their cars modified to meet emission regulations should have the right to reconsider if they're unhappy with the result. Many owners have expressed fears that their cars won't run as well after they've been brought into compliance with air quality standards.

The magazine made the comments in a filing with the federal court that has tentatively approved a settlement that would offer repairs or buybacks to owners of 475,000 VW, Audi and Porsche diesels.

VW has agreed to spend more than $10 billion to buy back or repair the 2.0-liter TDI diesels that emit up to 40 times the legally allowable levels of pollution.

Tough penalties needed

Consumer Reports said it generally supports the settlement but urged federal and state lawmakers to "assess tough civil penalties and any appropriate criminal penalties against the company in order to hold it fully accountable."

The public comment period for the settlement ends today. U.S. District Judge Charles Breyer has scheduled an Oct. 18 hearing at which he is expected to grant final approval.

However, VW still faces fines for violating clean air laws and must still adopt a plan for 85,000 3.0-liter diesel vehicles. It also faces civil suits filed by the states of New York, Maryland, and Massachusetts, as well as an ongoing criminal investigation by the U.S. Justice Department.

In addition, Volkswagen must still contend with repercussions from the emissions scandal in European and Asian markets. South Korea earlier this week suspended sales of 80 VW, Audi, and Bentley models, shutting down sales in one of Volkswagen's hottest markets. 

Volkswagen may never emerge from the lingering cloud of fumes created by its use of deceptive devices that made its TDI "clean diesels" appear to be operating within clean air limits when in fact they normally emitted up to 40 times as much pollution as U.S. law allows.

Clean-air groups say that even after they are "fixed," many of the VW diesels will still not meet emission requirements. 

“For reasons they didn’t state, they’re allowing fixed vehicles to not be fixed, but to allow vehicles to emit twice as much pollution as they otherwise would allow,” said Daniel Becker, director of the Safe Climate Campaign, Bloomberg reported.

VW recently agreed to a $15.3 billion settlement with regulators and consumers in June, but now New York, Massachusetts, and Maryland have filed new lawsuits seeking compensation for the environmental damage caused by the diesel engines.

“The allegations against Volkswagen, Audi, and Porsche reveal a culture of deeply-rooted corporate arrogance, combined with a conscious disregard for the rule of law and the protection of public health and the environment,” New York Attorney General Eric T. Schneiderman said. “These suits should serve as a siren in every corporate board room, that if any company engages in this type of calculated and systematic illegality, we will bring the full force of the law — and seek the stiffest possible sanctions — to protect our citizens.”

Destroyed evidence, lied about it

The states' suits allege that VW employees destroyed incriminating evidence after they were tipped off to the U.S. investigation and then repeatedly lied about it.

The cover-up followed a study by researchers at West Virginia University that alerted authorities in this country that the diesel cars emitted much more nitrogen oxides (NOx) when driven on the road than they did when undergoing emissions testing on test equipment.

VW tried to cover up the problem through sham recalls that the company knew wouldn’t meet the required standards and then only confessed to the defeat devices “when they knew the regulators had the goods on them,” according to Schneiderman’s statement.

Won't meet standards

While some of the oldest and dirtiest VWs will be bought back from their owners and destroyed, others will be modified to run cleaner, although under the terms of the $15 billion settlement, they still won't fully meet U.S. emission standards.

VW is paying millons of dollars into an environmental fund as partial payment for environmental damage, amounting to a tacit admission that many of the cars will still be polluting the air.

The California Air Resources Board estimates that the "fixed" VW diesels will have their emissions cut by as much as 90 percent. But since the cars now emit as much as 40 times the permitted amounts of NOx, even a 90 percent reduction won't bring them into compliance.

California will allow many of the cars to remain on the road, however, recognizing that the owners aren't be blame. 

“Volkswagen knowingly broke the law and lied about it, not the vehicle owners,” said David Clegern, a spokesman for the Air Resources Board, according to Bloomberg. “Therefore, owners are being given as much flexibility as possible in how they choose to handle their individual vehicles.”

There is, however, still no approved plan to retrofit the cars with improved emission systems. VW and the various federal and state agencies are still negotiating what form that final solution will take.

Suddenly, it's not so bad being the owner of a Volkswagen TDI “clean diesel” car. The settlement announced this week by VW will reward owners handsomely, according to an analysis by Autolist.

Thousands of U.S. consumers have been stuck with vehicles they assumed were good for the environment. But VW admitted last fall that the onboard computer adjusted the diesel emissions when it sensed an emissions test was taking place.

During the tests, the emissions were reduced to within standards. The rest of the time, the cars gave off emissions well above legal standards.

As a result, VW agreed to a more than $14 billion settlement, requiring it to buy back affected vehicles and terminate leases, as well as pay consumers cash reparations.

After studying the details of the deal, Autolist concludes consumers will come out ahead. The company reports nominal vehicle value has gone down an average of $2,017 because of the diesel emissions cheating scandal.

250% to 500% bonus

Owners, meanwhile, are getting $5,100 to $10,000 settlement reparations payments alone. That's 250% to 500% more than the loss.

At the same time, the anticipated market value of scandal and non-scandal vehicles has recovered to 4.8% and 1.5% below expectations, respectively. That's sharply higher since March.

Despite the recovery, however, it still takes a long time to sell a Volkswagen. Time on the market is up to all time highs, even for cars not involved in the scandal. Autolist.com says brand perception damage and the lack of a real fix for the scandal-affected cars may hurt sales for months to come.

According to Edmunds.com's projections for June auto sales, VW sales are expected to be down only 2.1% from June 2015, before the scandal broke. Even more encouraging for the brand, VW sales are expected to rise 0.4% from May.

The $14.7 billion settlements agreed to by Volkswagen today provide buyback and lease termination deals for nearly 500,000 consumers who bought the company's TDI "Clean Diesel" cars. However, the deals will not be available until this fall.

The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs, and Beetles, as well as the TDI Audi A3.

Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles sold or leased in the U.S., and spend up to $10.03 billion to compensate consumers under the program. 

In addition, the companies will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

The settlements require Volkswagen to offer owners of any affected vehicle the option to have the company buy back the car and to offer lessees a lease cancellation at no cost.

Volkswagen may also propose an emissions modification plan to EPA and CARB, and if that plan is approved, it may also offer owners and lessees the option of having their vehicles modified to reduce emissions instead of taking a buyback.

Under the U.S./California settlement, Volkswagen must achieve an overall recall rate of at least 85% of affected 2.0 liter vehicles under these programs or pay additional sums into the mitigation trust fund. The FTC order requires Volkswagen to compensate consumers who elect either of these options. 

Volkswagen must set aside, and could spend up to, $10.03 billion to pay consumers in connection with the buyback, lease termination, and emissions modification compensation program. The program has different potential options and provisions for affected Volkswagen diesel owners depending on their circumstances:

Buyback option

Volkswagen must offer to buy back any affected 2.0 liter vehicle at  their retail value as of September 2015 -- just prior to the public disclosure of the emissions issue.

Consumers who choose the buyback option will receive between $12,500 and $44,000, depending on their car’s model, year, mileage, and trim of the car, as well as the region of the country where it was purchased.

In addition, because a straight buyback will not fully compensate consumers who owe more than their car is worth due to rapid depreciation, the FTC order provides these consumers with an option to have their loans forgiven by Volkswagen. 

Consumers who took out third party loans have the option of having Volkswagen pay off those loans, up to 130 percent of the amount a consumer would be entitled to under the buyback (e.g., if the consumer is entitled to a $20,000 buyback, VW would pay off his/her loans up to a cap of $26,000).

Modifications to emissions system 

The settlements also allow Volkswagen to apply to EPA and CARB for approval of an emissions modification on the affected vehicles, and, if approved, to offer consumers the option of keeping their cars and having them modified to comply with emissions standards.  

Under this option, as part of an agreement with the Federal Trade Commission (FTC), consumers would also receive money from Volkswagen to redress the harm caused by VW’s deceptive advertising. 

Consumers who sold their TDI vehicles after the VW defeat device issue became public may be eligible for partial compensation, which will be split between them and the consumers who purchased the cars from them as set forth in the FTC order.

Find your options

Eligible consumers will receive notice from VW after the orders are entered by the court this fall. Consumers will be able to see if they are eligible for compensation and, if so, what options are available to them, at VWCourtSettlement.com and AudiCourtSettlement.com.

They will also be able to use these websites to make claims, sign up for appointments at their local Volkswagen or Audi dealers, and receive updates. 

Consumer payments will not be available until the settlements take effect if and when approved by the court, which may be as early as October 2016.

Consumers were cheated

“Today’s announcement shows the high cost of violating our consumer protection and environmental laws,” said FTC Chairwoman Edith Ramirez. “Just as importantly, consumers who were cheated by Volkswagen’s deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them.”

The FTC sued Volkswagen in March, charging that the company deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which falsely claimed that the cars were low-emission, environmentally friendly, met emissions standards, and would maintain a high resale value.

The settlements use the authorities of both the EPA and the FTC as part of a coordinated plan that gets the high-polluting VW diesels off the road, makes the environment whole, and compensates consumers.

Still coping with the aftermath of its diesel emissions cheating scandal, Volkswagen has announced a major shift in direction – away from diesel and gasoline powered vehicles and toward what it calls “sustainable mobility,” another way of saying electric vehicles.

The company calls the initiative “Together – Strategy 2025.” It has announced plans to introduce more than 30 purely battery-powered electric vehicles over the next 10 years. Eventually, it expects electric vehicles to account for around 25% of its global market.

VW is projecting electric vehicle sales of two to three million units by 2025.

While such a major push into electric vehicles would be a major gamble for most automotive companies firmly tied to the internal combustion engine, VW may see it as less risky. It was badly tarnished by revelations that its on-board software on clean diesel models was programmed to fool emissions test equipment.

Image transformation

One way to recover and improve its image is to transform VW from a company closely associated with diesel power to one more aligned with battery propulsion.

Beyond that, VW CEO Matthias Müller said the company is convinced shifting to electric cars will align Volkswagen with the future of automotive technology. In other words, its just good business.

“This will require us – following the serious setback as a result of the diesel issue – to learn from mistakes made, rectify shortcomings and establish a corporate culture that is open, value-driven and rooted in integrity," Müller said.

Part of the strategic shift also includes development of a mobility solutions business that will develop and acquire new businesses in transportation. Specifically, that initiative is looking at ride sharing and car sharing.

Self-driving car by end of the decade

To achieve goals in that area, Volkswagen said it plans to provide the necessary resources to experiment with autonomous driving and artificial intelligence. The objective to have a competitive self-driving car by the end of the decade.

While other traditional automotive manufacturers have made investments in electric propulsion, perhaps none has done so to the extent VW has laid out. The Volkswagon program will put it in direct competition with the much smaller Tesla, which has a several year head start and produces only battery powered vehicles.

Volkswagen, meanwhile, is still trying to put the diesel emissions cheating scandal behind it. In April the company announced it would fix or buy back up to a half million cars involved in the scandal.

VW has also agreed to establish a fund to address environmental damage caused by the excess emissions emitted by its clean diesel cars.  

[UPDATE 4/21]: As expected, Volkswagen will fix or buy back about 500,000 "clean diesel" cars that contain software intended to fool emissions test equipment. 

U.S. District Judge Charles Breyer said VW has agreed to offer affected owners several options, including a buyback, cancellation of their lease or, possibly, modification of their car. Consumers will also receive "substantial compensation."

The option have the cars repaired relies on federal and state approval of VW's proposal to fix or replace the software that returns deceptively readings when the TDI diesels are undergoing emissions tests. Neither the Environmental Protection Agency nor the California Air Resources Board has yet approved any of VW's proposed fixes. 

VW has also agreed to establish a fund to help clean up environmental damage caused by the excess nitrogen oxide emitted by the cars. The company will also be required to commit funds to promote green vehicle technologies, the judge said.

Volkswagen called the agreement an "important step" in regaining public trust.

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Volkswagen is expected to buy back roughly 500,000 diesel-powered cars from U.S. consumers under the terms of a settlement expected to be announced today, at a cost estimated at $7 billion. The German automaker, which has set aside $10 billion to resolve the issue, also faces federal and state fines that could total billions more.

“This is VW's first major step toward resolving its diesel issue, though it still needs to be approved and may fall short of regulatory requirements," said Kelley Blue Book analyst Karl Brauer. "It's also a very costly solution, particularly given how much the company has already lost in terms of market value and sales."

But Brauer, like most industry analysts, said it's a necessary step for the company, which has seen a huge drop in its stock price and a sharp decline in sales. "VW has to address this issue before it can move forward,” Brauer said.

The buyback plan may mollify environmentalists, who have been calling for just that. Sierra Club California Chapter Director Kathryn Phillips said in March that the polluting vehicles "need to be fixed or taken off the road, and the consumers who trusted they were buying less-polluting cars need to be compensated. Period."

"Otherwise the legacy of Volkswagen’s deceitful actions will be as dirty and dangerous as the smog left behind by their vehicles -- people will continue to breathe dirtier air, consumers will lose faith in watchdog agencies, and manufacturers will believe they can cheat and get away without feeling the full consequence," Phillips said.

Even though it is the most extreme of several proposed options, the buyback plan isn't likely to please everyone. After all, some consumers might want to keep their cars, flawed though they may be. Others will no doubt quibble with the price and demand payment for their time and trouble.

On that issue, Germany's Die Welt newspaper reported that the deal would involve VW paying each affected customer $5,000, in addition to buying back the car.

Can't be modified easily

The buyback, however, is seen as an admission by VW that the software that deceives emissions testing machines is so integral to the operation of the car that it can't be modified or removed without adversely affecting fuel economy, performance, or both.

VW hinted at the massive buyback Wednesday when it said that no trial will be needed to hear the claims of consumers who have brought suit against the company.

VW has a court date today before U.S. District Court Judge Charles R. Breyer in San Francisco and Breyer has made it clear he plans to schedule a trial for this summer if VW does not have a proposal that satisfies federal and state agencies as well as the plaintiffs in thousands of lawsuits that have been consolidated in his court.   

Last month, Breyer told VW he wants a "concrete proposal" by today. He said that if the latest deadline isn't met, he will consider setting a trial date for this summer to hear more than 500 consumer lawsuits that are being consolidated into a single trial through a process called multidistrict litigation.

Just over a month ago, U.S. District Court Judge Charles R. Breyer gave Volkswagen one more month to present a plan to clean up its dirty diesel cars in a way that satisfies federal and state officials and compensates owners for their losses.

That extra month is almost up, and Volkswagen has responded with an assertion that there will be no need for a trial on the 600 or so lawsuits that have been consolidated under Breyer's supervision, Automotive News reported.

In the United States, defendants do not normally tell a judge whether or not to go to trial, but VW said it is confident that after it presents its plan to Breyer, there will be no need for the case to move forward. 

Breyer has indicated in past hearings that he was losing patience with VW and was inclined to hold a trial over the summer in order to get the 600,000 VW diesels either fixed or taken off the roads.

At an earlier hearing in his San Francisco courtroom, Judge Breyer reminded VW that with every passing day, its cars are pumping excess pollution into the air and consumers who were taken in by VW's advertising are stuck with cars they can't sell. 

Both the U.S. Environmental Protection Agency and the California Air Resources Board have rejected previous VW plans to modify the Volkswagen diesels so that they return accurate emissions readings.

Blame it on Audi

In another development, the German newspaper Handelsblatt reported that engineers at Audi in 1999 developed the "defeat devices" that cut emissions readings when VW and other Volkswagen-made brands are being tested.

The Audi engineers developed software that would turn off certain engine functions and make the cars run cleaner when they were hooked up to emissions testing machines, then turn those functions back on when the test was over. 

Audi did not use the software itself, but when, six years later, VW engineers could not bring nitrogen oxide emissions below legal thresholds, they began installing the software developed by Audi, the newspaper said. The company did not immediately comment on the report. 

Volkswagen has turned into one of those brands that never seems to have a good day anymore. In the latest bit of bad news, Best Buy's Geek Squad is ditching its fleet of VW Beetles for the Toyota Prius C. 

And in Europe, some Volkswagen diesels are being recalled a second time because the first attempt to reprogram emissions systems didn't work as planned.

Best Buy announced its trade-in plans yesterday, saying its 1,000 Priuses are more efficient and more tech-savvy than the aging Beetles.

"The new Geekmobile, boldly bearing the updated logo, better reflects today’s new Geek Squad — the nationwide tech-support task force that is continually expanding its services to keep pace with ever-changing technology," said Best Buy's John Vomhof Jr.

The new, greener Geekmobile will cut the Geek Squad fleet’s emissions by 50 percent, as compared with the previous vehicle, which rolled out nationwide in 2004, Vomhof said, adding that the switch to the hybrid will help Best Buy make significant progress toward its commitment to reducing its own carbon emissions by 45 percent by 2020.

European fix failed

In Europe, thousands of Volkswagens recalled over the diesel emissions scandal will need to be recalled again, Reuters reported. The news agency said a software update installed on 160,000 2.0-liter diesel cars fixed the emissions problem but triggered an increase in the cars' fuel consumption.

A VW spokesman said the company will have to "go back to work on the software again."

Volkswagen has admitted that it rigged emissions control software on its TDI diesels to operate at legal levels when the cars are being tested. The rest of the time, emissions are as much as 40 times greater than regulations permit.

Analysts have warned that fixing the emissions problem may affect the cars performance or fuel consumption, or both. 

Federal and state regulators in the U.S. have rejected VW proposals to fix the problem and a federal judge has given the company until April 24 to come up with an acceptable plan. 

The Porsche Macan is one of those supercars that, with the slightest touch of the accelerator, will leave a smokin' spot where it stood. But many of the juiced-up SUVs bound for the U.S. are stuck in port thanks to their parent company's misdeeds.

Ever since Volkswagen admitted to using a "defeat device" on its TDI diesel models to fool emissions testers, state and federal officials have been taking a closer look at how they certify new models, particularly in the case of the California Air Resources Board (CARB).

The CARB certifies vehicles for California, home to more cars than any other state, and its ratings are used by 12 other states that have the stricter air quality regulations pioneered by California.

Gridlock

Trapped in the middle of this regulatory traffic jam is the Macan, Porsche's hottest selling model. All 2017 Macans shipped to states that observe the CARB standards are stuck in port awaiting CARB certification, Automotive News reports.   

Porsche executives insist the delay is no cause for concern. "It takes longer, but we're following procedure," Klaus Zellmer, CEO of Porsche Cars North America said. "The formal procedure is setting the pace for us, and we understand that."

Fine, but tell that to the dealers and customers who are waiting for the Macans being held hostage at ports of entry.

A Washington State dealer quoted by the auto trade journal said he has seven pre-sold Macans stuck in port and none in stock. 

Just about everybody is mad at Volkswagen these days, including VW dealers. Now, a group of three dealers have filed a class action suit against the German automaker, saying it intentionally defrauded dealers and consumers with its illegal "defeat devices."

The lawsuit, filed today in federal court in Illinois, charges that VW’s deception, coupled with the drop in value of diesel vehicles, the inability of franchise dealers to sell diesel vehicles, and the loss in value of the VW brand post-Dieselgate delivered a devastating blow to dealers’ profits and the value of their franchises

“Plaintiffs and the Franchise Dealer Class have invested millions, collectively hundreds of millions of dollars in the Volkswagen brand,” the suit states. “But now the brand value has plummeted, sales of VW diesels have completely halted, and sales of all VW cars have plummeted.”

The suit also alleges that VW forced dealers into a so-called "floorplan financial" scheme with VW-owned Volkswagen Credit.

"Pump and dump"

“For VW dealers – many of which are small, family-owned franchises – Dieselgate amounts to a classic ‘pump and dump’ operation, in which VW exploited the CleanDiesel eco-friendly market that it helped create, boosting the price of entry and continuation in the market for VW franchises,” said Steve Berman, managing partner of the Hagens Berman law firm. “All the while, VW withheld information about the impending Dieselgate fiasco, and left dealers to fend for themselves as the scandal unfolded.”

The suit says that just as consumers readily purchased what they thought were reliable, environmentally friendly vehicles, franchise dealers built new showrooms and purchased new facilities, while heavily stocking lots with CleanDiesel vehicles, based on VW’s false marketing.

“Franchise owners are now left with lots full of CleanDiesel vehicles they are unable to sell, and these cars have suffered tremendous loss of value and take up inventory space and carrying costs,” Berman added. “VW dealerships large and small have been at the mercy of an unethical corporation, much like the hundreds of thousands of owners across the country, and we believe it’s time to take a stand for their rights.”

You can add the Federal Trade Commission (FTC) to the long list of those suing Volkswagen. The agency wants the automaker to be ordered to compensate the 550,000 consumers who bought or leased a TDI "clean diesel" car from VW.

“For years Volkswagen’s ads touted the company’s ‘Clean Diesel’ cars even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests,” said FTC Chairwoman Edith Ramirez. “Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”

U.S. Senator Bill Nelson (D-Fla.) had asked the agency in September to investigate VW after news of the defeat devices broke. 

“This was one of the most egregious examples of a company deceiving the public,” said Nelson in a statement today.  “Hopefully, the court will provide adequate redress to consumers and send a strong message that this type of corporate behavior won’t be tolerated. ”

VW is struggling to come up with a plan to retrofit the emission control devices on its cars so that they comply with federal and California emission standards. A federal judge in California last week gave VW 30 more days to submit a plan to the court. If it fails to do so, the court could order Volkswagen to buy back the cars or otherwise compensate owners.

The FTC's suit charges that Volkswagen deliberately deceived consumers from 2008 through 2015 with advertisements and promotional materials targeting environmentally-conscious consumers, promising that its TDI-equipped cars produced lower emissions than other diesels while achieving high gas mileage and spirited performance.

In fact, the suit says the cars produced up to 4,000 percent more than the legal limit of nitrogen oxides (NOx), a harmful chemical that damages the environment and causes respiratory problems in humans and other animals.

"Our most important priority is to find a solution to the diesel emissions matter and earn back the trust of our customers and dealers as we build a better company," VW said in a statement.

A U.S. District Court judge has given Volkswagen one more month to come up with an acceptable plan to get its rigged diesel engines off the road, after the automaker failed to meet today's deadline. 

A VW attorney said the company's engineers are "working around the clock" to find a fix for a software device that gives deceptively low emission readings when a TDI "clean diesel" car is being tested, but then pollutes at as much as 40 times the legal limit when the test is over.

But while Volkswagen engineers may or may not be working around the clock, some consumers are wondering how they are supposed to get around now that their VW diesels have been outed as anything but clean.

That's the fix California motorist Christianne finds herself in. She bought a diesel-powered Volkswagen in 2012, thinking she was doing something good for the environment. But now she's unable to renew her registration because the car can't pass California's tough smog test, she told ConsumerAffairs. 

"The DMV states I need a smog check and a certificate from VW dealership for a proof of correction certificate," Christianne said. That, of course, is something she won't be able to get for as long as Volkswagen fails to get approval from state and federal agencies for its plan to make the cars meet the specifications it originally promised.

"I am stuck in a bind, it seems," Christianne said, reflecting the position a growing number of consumers are likely to face as their registrations come up for renewal, a procedure that in most states requires a smog test.

Fixed or scrapped

The delays are causing environmental damage as well as hurting individual consumers, according to Sierra Club California Chapter Director Kathryn Phillips who said the polluting vehicles "need to be fixed or taken off the road, and the consumers who trusted they were buying less-polluting cars need to be compensated. Period."

"Otherwise the legacy of Volkswagen’s deceitful actions will be as dirty and dangerous as the smog left behind by their vehicles -- people will continue to breathe dirtier air, consumers will lose faith in watchdog agencies, and manufacturers will believe they can cheat and get away without feeling the full consequence," Phillips said.

Concrete proposal

In court today, judge Charles Breyer said he wants a "concrete proposal" by April 21. Options include a technical fix approved by federal and state environmental agencies and a buyback plan or other remedies no one has yet thought of. At a hearing in February, Breyer had given VW one month to come up with a plan that could be executed within six months. 

Breyer said today that if the latest deadline isn't met, he will consider setting a trial date for this summer to hear more than 500 consumer lawsuits that are being consolidated into a single trial through a process called multidistrict litigation.

That could potentially allow the court to impose a settlement on VW, which initially denied it had phonied up the emission controls, then admitted it had but claimed only a handful of engineers know about it. Now the company says it needs more time to organize a defense. 

Volkswagen CEO Michael Horn's sudden resignation this week is the prelude to an even bigger drama coming up at the end of the month. That's when VW lawyers must appear before a federal judge and explain how the carmaker plans to fix nearly 600,000 “clean diesel” cars in the U.S. that cheat on emissions tests.

Meanwhile, automotive site Autolist has presented more evidence of a damaged VW brand and how U.S. automakers are benefiting.

Autolist is an online automotive marketplace where cars are listed for sale. Autolist has monitored recent search traffic and concluded that, as the VW emissions cheating scandal has unfolded, Volkswagen has fallen in the eyes of the American consumer while the status of U.S. carmakers has risen.

VW prices at all-time lows

The site says its most recent analysis of 42 million bits of data shows that list prices for Volkswagens among the 600,000 models tainted by the scandal have fallen to all-time lows. The price of those cars are 6.4% less than expected while the list price of VW models not involved in the scandal are down 2.4%.

It's also taking a lot longer to sell a Volkswagen. The Autolist report shows the time spent on the market by scandal-tainted cars is 88% above average, at 178 days. But even the VWs not touched by scandal are taking longer to sell, 13% above average at 106 days.

Good news for Detroit

Volkswagen's losses appear to be American carmakers' gains. Chevrolet and Ford are both selling faster since the diesel scandal, with Chevy selling 13.5 days faster and Ford shedding 14.5 days on the market.

Autolist says that trend might continue for a while, since public opinion about U.S. brands is on the rise. Again, it appears to be Ford and Chevrolet that have benefited most.

When it comes to searches for specific brands, Autolist says volume for comparable Fords and Chevrolets have increased 14% and 12.3% since the scandal. At the same time, the VW search line is on a downward trend.

Volkswagen still said how it plans to fix all those diesel powered cars with software designed to help them fool U.S. emissions test. And it will be up to a new CEO to figure out how to do it.

Michael Horn, president and CEO, Volkswagen Group of America, has resigned effective immediately. A statement from the company said the decision was mutual.

Hinrich Woebcken, another top VW executive, will assume the duties of CEO. He will have a tough task in preparing the automaker to meet a court-imposed deadline to explain by March 24 how it plans to repair nearly 600,000 cars in the U.S. that fail to meet emissions standards.

Last month, U.S. District Court Judge Charles Breyer gave the German automaker one month to come up with a plan to bring the offending vehicles into compliance. As it stands now, the cars do not meet U.S. clean air standards.

30 days notice

At the hearing last month. Breyer reminded VW's lawyers that with each day without a fix, the cars are belching excess pollution into the air. As we reported in late February, MIT researchers conclude that the extra diesel pollution from the non-compliant cars will directly contribute to 60 deaths in the U.S.

If the offending cars are recalled in the short term, the researchers said another 130 premature deaths could be avoided.

In September, Volkswagen apologized and stopped the sales of “clean diesel” vehicles in the U.S., after it was shown that the onboard software was programmed to trick emissions testing equipment, to show the cars were in compliance with clean air standards, when in fact they were emitting 40 times the allowed pollution.

Since then, the Volkswagen brand has taken a hit as the company has struggled to find a way to make the vehicles perform within emissions standards.

Those cute little Volkswagen "clean diesels" -- you know, the ones with the defeat devices that cheat emissions tests -- will directly contribute to at least 60 premature deaths in the United States, more if a recall is not conducted promptly, a new MIT-led study finds.

Researchers took the amount of estimated excess pollution per car -- roughly 40 times the amount permitted by law -- and multiplied that times 482,000, the number of affected cars sold. Then they extrapolated the results to include population distribution and health risk factors and concluded the deceitful diesels will have "significant effects" on public health.

"It seemed to be an important issue in which we could bring to bear impartial information to help quantify the human implications of the Volkswagen emissions issue," said Steven Barrett, lead author of the study and an associate professor of aeronautrics and astronautics at MIT. "The main motivation is to inform the public and inform the developing regulatory situation."

According to the study, published in the journal Environmental Research Letters, excess emissions from Volkswagen's defeat devices will cause around 60 people in the U.S. to die 10 to 20 years prematurely.

If the automaker recalls every affected vehicle by the end of 2016, more than 130 additional early deaths may be avoided. If, however, Volkswagen does not order a recall in the U.S., the excess emissions, compounding in the future, will cause 140 people to die early.

Chronic cases

Besides the death toll, the researchers estimated that Volkswagen's trickery will contribute directly to 31 cases of chronic bronchitis and 34 hospital admissions involving respiratory and cardiac conditions. They calculate that individuals will experience about 120,000 minor restricted activity days, including work absences, and about 210,000 lower-respiratory symptom days.

"We all have risk factors in our lives, and [excess emissions] is another small risk factor," Barrett explains. "If you take into account the additional risk due to the excess Volkswagen emissions, then roughly 60 people have died or will die early, and on average, a decade or more early."

Barrett says that, per mile driven, this number is about 20 percent of the number of deaths caused by highway accidents.

A federal judge today gave Volkswagen one month to come up with a firm plan to bring nearly 600,000 of its "clean diesel" cars into compliance with United States clean air laws.

At a hearing in San Francisco, U.S. District Court Judge Charles R. Breyer reminded VW that with every passing day, its cars are pumping excess pollution into the air and consumers who were taken in by VW's advertising are stuck with cars they can't sell.

Breyer, who is overseeing hundreds of lawsuits against VW, gave the company until March 24 to say how it will repair or replace the cars and how it will compensate owners -- and said he expects whatever plan VW comes up with to take no longer than six months. 

“It seems to me six months is long enough to determine whether or not there is an engineering process that can be utilized by Volkswagen and will be acceptable to the U.S. government,” Breyer said, Automotive News reported.

Lawyers for VW said they are in negotiations with various federal and state agencies and with armies of lawyers representing various individual and class action plaintiffs, but Breyer said he wanted to introduce a "sense of urgency" into finding and implementing a solution.

Earlier plan rejected

Federal regulators earlier rejected VW's initial plans to retrofit about 500,000 of the affected vehicles with 2.0-liter engines. A plan to repair vehicles with 3.0-liter engines is still pending.

At one point, Judge Breyer spoke harshly about the delays. 

"The story about lawyers is that if you give them a year to do something, it will take them a year to do something. If you give them 30 days to do something, they'll do something in 30 days," he said.

VW has said it is working as fast as it can to reach a solution that is acceptable to U.S. and European regulators.

Breyer earlier appointed former FBI director Robert Mueller as a settlement adviser in hopes of keeping the settlement and repair talks on track.

Volkswagen may have a long way to go until it can fully regain the consumer confidence it lost due to the diesel scandal. But if the company’s January deliveries and sales are any indication, then perhaps it is on its way.

Reuters reports that deliveries at VW’s core autos division grew in January after posting a decline in 2015. A rebound in sales numbers were also distributed along several different brands, including luxury brand Audi and Czech unit Skoda.

Chief executive officer Matthias Mueller told German news agency DPA on Tuesday that he is confident that VW will win back customers as time goes on.

“We are quite confident by regaining the trust of our customers, of the public and of our remaining shareholders, we will have a good year 2016,” he said.

Despite the positive sales numbers, VW still has a long way to go in the U.S. before its diesel scandal can be put to rest. There is still no technical fix for the 600,000 vehicles in the country, and the legal ramifications still continue to pile up. Mueller admitted that things certainly do look bleak for VW on this front. “We will certainly be a loser in the U.S.,” he said.

Back in December it was announced that Volkswagen would be turning to Kenneth Feinberg to settle claims related to its diesel scandal. The American attorney, who is noted for handling compensation funds for GM’s ignition switch scandal and many others, has told a German newspaper that VW will be offering “generous compensation packages to the roughly 600,000 U.S. owners of diesel vehicles whose emissions are over the legal limit,” according to a Reuters report.

However, in what manner -- and when -- consumers can expect to be compensated is still uncertain. The company has not yet determined whether vehicle owners will be given cash, car buy-back options, repairs to existing cars, or replacement cars, according to Feinberg’s report.

High expectations

The process of determining adequate compensation has been slowed mostly because VW has had trouble putting a price on the scandal. The company has not been able to come to an agreement with federal agencies on how the problem will be fixed – something that Feinberg is quick to note.

“My hands are tied as long as VW and the authorities have not overcome their differences,” he said, stating that it’s unlikely that the fund would be set up within the established 60-90-day period. However, he is confident that once things get rolling he’ll be able to create a plan that will be accepted by the public. He will be looking to duplicate his past successes in creating compensation plans.

“Look at my prior cases: 97 percent of the victims of Sept. 11 accepted my offer. At GM and BP it was more than 90 percent, too. That has to be my target for VW,” he said.

Fair treatment

For many consumers, being compensated for the scandal is simply a matter of fairness. The scandal may not have affected them on a personal level, but the general outcry shows that consumers won’t stand for being misled.

“It is a purely business transaction, less emotional. I see that from emails I get from vehicle owners, who say things like: ‘Mr. Feinberg, I know I haven’t lost a relative, I just want to be treated fairly.’ They are all quite reasonable,” he said.

The attorney shouldn’t have too much resistance when it comes to setting a price that consumers will agree on; VW has given him complete authority over setting compensation prices. 

Add the state of New Jersey to the long list of plaintiffs suing Volkswagen for using deceptive software to allow its VW, Porsche, and Audi diesel-powered cars to masquerade as low-emission vehicles.

“For the past decade Volkswagen engaged in one of the largest frauds in the history of the automobile industry,” the state’s lawsuit asserts. “It developed and distributed into the marketplace sophisticated software to evade emissions requirements, it misled regulators about the true environmental impact of its vehicles, and it misled consumers about the products that it was marketing as supposedly good for the environment.”

“Our lawsuit alleges that Volkswagen put profit ahead of honesty, integrity, fair business practices and – most disturbing of all – the well-being of people living and breathing the air here in New Jersey and across the country,” said Acting Attorney General John J. Hoffman. 

The New Jersey suit is similar to those filed by New Mexico, Texas, and West Virginia. The company also faces a federal complaint that seeks billions of dollars in damages, as well as a growing list of individual and class action suits.

Volkswagen says its primary concern at the moment is figuring out how to recall and fix the affected vehicles in a manner that satisfies regulators.

"Profited greatly"

The New Jersey suit, filed Friday in Hudson County Superior Court, alleges that Volkswagen “profited greatly” from its effort – launched in 2005 – to gain a greater share of the U.S. passenger vehicle market by quietly developing, then deceptively promoting, diesel vehicles that appeared to be environmentally friendly, but in fact were equipped with pollution control systems that only functioned during emissions testing.

The alleged conspiracy enabled Volkswagen to steadily increase its passenger vehicle sales over time so that by 2014, it accounted for about 70% of new diesel passenger car sales in the U.S. 

The New Jersey suit alleges that Volkswagen fraudulently increased its sales and market share “at the expense of the unsuspecting public.” By emphasizing the supposed superiority of German engineering, the company successfully charged “inflated purchase prices” for the cars, which spewed illegal qualities of nitrogen oxide (NOx) into the air, endangering the health of New Jerseyans, the suit argues.

NOx pollution has been shown to contribute to harmful ground-level ozone (smog) and fine particulate matter (soot), and exposure to NOx and its byproducts has been linked to such serious health problems as cardiopulmonary disease, lung cancer, chronic obstructive pulmonary disease, and exacerbation of asthma, the complaint alleges.

Current estimates are that Volkswagen sold approximately 580,000 vehicles equipped with the defeat software in the United States, about 17,420 of them in New Jersey.

There is a rule to writing press releases that goes something like this: if you can't say something nice about yourself, don't say anything at all.

So when Volkswagen, still fighting to overcome negative consumer sentiment related to its diesel cheating scandal, reported January vehicle sales in the U.S., it seized on one of the few bright spots. Sales of the VW Tiguan were pretty good.

In fact, VW says the Tiguan “produced the best January results on record,” selling 2,528 units – an increase of 71% over last January. As it turns out, the Tiguan accounted for 12.5% of all VW sales in the U.S. last month, since a total of 20,079 Volkswagens moved off dealer lots.

The positives

“We are encouraged by the strong performance of the Tiguan,” Mark McNabb, chief operating officer, Volkswagen of America, said in the release. “January sales numbers were down due to the seasonal nature of the fleet business. Despite that and the weather conditions in the Northeast portion of the country, Volkswagen dealers improved in terms of retail business.”

VW was also happy with sales of the Golf R, noting 477 vehicles were delivered. It said sales of the e-Golf were pretty good too – all 328 vehicles.

The negatives

The rest of the release contains a chart that lists delivery of other VW models – those that went unmentioned in the body of the release. Here are a few:

• Golf – down 51.7%
• GTI – down 24.4%
• Jetta – down 8.8%
• Beetle – down 32.4%
• Passat – down 43.1%

For the month of January, Volkswagen's total U.S. sales declined 14.57%. 

As we reported last week, overall new car sales are expected to be down once all of January's sales figures are added up.

Analysts at Kelley Blue Book project, however, that total U.S. car sales will be down just 3%, due in part to the blizzard that socked the East Coast.

In the past couple of months, consumers who have been affected by the VW diesel scandal have expressed their outrage. In the U.S., numerous consumer groups have filed class action lawsuits, and both the feds and the state of California have rejected company proposals pertaining to the necessary recall. In all, the company stands to lose billions of dollars to U.S. consumers, as well as another $46 billion for violating the Clean Air Act.

Now, Reuters reports that a large number of shareholders are suing the company over the scandal in Germany as well. The suit has been filed by a German firm called Nieding + Barth and seeks to claim hundreds of millions of euros in damages for 66 U.S. and British institutional investors, as well as thousands of private investors.

The action represents what might be the “biggest platform for suits against Volkswagen in Germany,” according to Klaus Nieding.

No end in sight

Nieding + Barth will be using capital market model claims when they make their case in German court – a legal precedent that uses previous court rulings as templates for similar, future rulings. The firm also plans to assert that VW was aware of its emissions violations before the news was first announced in September and that the public should have been told earlier.

Since the scandal broke in September, VW stocks have depreciated by about a third of their original value, a figure representing around $24 billion dollars. Even after the dust settles on the lawsuits we know about, investors from around the world with stakes in the company will be seeking compensation for the money they’ve lost.

Finance groups Bentham Europe and IMF Bentham stated back in November that it would be contacting VW’s top 200 investors for a future damages claim that could break in February. 

Every day gets a little worse for Volkswagen. Yesterday, California nixed the carmakers' plan to recall and retrofit 2.0-liter diesel-equipped cars and today the U.S. Environmental Protection Agency said the VW plan faces some tough testing before it has a chance of winning approval.

"We're not there yet," said Chris Grundler, director of the EPA's Office of Transportation and Air Quality, saying the agency wants a plan that brings the VWs into compliance with clear air regulations without creating adverse impacts for owners, Automotive News reported. 

It's not only VW owners who are on hold while the plans are reviewed. Dealers are also facing a slowdown in business since no new Volkswagen diesels can be sold until the situation is resolved. Used diesels are also sitting idle on dealer lots.

Top VW officials met today with EPA Administrator Gina McCarthy. While the meeting wasn't public, both sides emerged saying that the conversation had been worthwhile and the work was continuing.

"We appreciate the time that Administrator McCarthy took to meet with us," the company said in a statement. "Volkswagen will continue to fully cooperate."

No quick fix

VW had hoped for a quick fix when it was revealed last September that the company had installed deceptive software on its TDI Clean Diesel cars. The software kicked in and reduced emissions to legal levels only when the cars were undergoing an emissions test. The rest of the time, the cars were emitting up to 40 times the legal limit of pollutants.

VW has put its foot in its mouth several times, most recently earlier this week when VW of America CEO Michael Horn labeled the EPA and California talks "political."

Grundler today took issue with that, saying the negotiations were "not a political matter ... it's a serious matter." 

Connecticut Attorney General George Jepsen, one of several state AGs also investigating VW, lambasted the carmaker yesterday for taking the matter lightly. 

"Volkswagen has failed consumers on multiple levels and should be taking steps – as it initially promised to do – to correct a culture that allowed such wide-scale deception to occur. In an apparent moment of candor in Detroit, we now learn that the company's newly appointed and most senior leader doesn't believe Volkswagen lied, which is undisputable, and cannot say when it plans to deliver its solution to a problem that is affecting millions of Americans, which is unacceptable," Jepsen said.

Volkswagen's plan to clean up its 2.0-liter diesel-powered cars is "incomplete, substantially deficient and falls far short of meeting the legal requirements," the California Air Resources Board said today. CARB also said the plan would take too long to complete.

It's a serious setback for Volkswagen, which had admitted using stealth softare to fool emissions testing equipment, enabling its cars to emit 40 times the legal limit of pollutants. 

VW, trying to put the best face on the rejection, said it is still in talks with California. CARB put it another way -- saying it is continuing its investigation into Volkswagen's actions.

The rejection of VW's plan did not result in any immediate penalties.

More scrutiny

VW CEO Matthias Mueller meets tomorrow (Wednesday) with U.S. Environmental Protection Agency chief Gina McCarthy.

In advance of that meeting, EPA issued a statement saying it agrees with California "that Volkswagen has not submitted an approvable recall plan to bring the vehicles into compliance and reduce pollution."

Separately, VW is working on a plan to fix larger 3.0-liter diesel engines used in some VW, Audi, and Porsche vehicles.

Besides California and the feds, VW is facing scrutiny by state attorneys general. One of those AGs, Connecticut's George Jepsen, said he is disturbed by Mueller's comments to reporters at the Detroit Auto Show that seemed to downplay the seriousness of the matter.

"Volkswagen has failed consumers on multiple levels and should be taking steps – as it initially promised to do – to correct a culture that allowed such wide-scale deception to occur. In an apparent moment of candor in Detroit, we now learn that the company's newly appointed and most senior leader doesn't believe Volkswagen lied, which is undisputable, and cannot say when it plans to deliver its solution to a problem that is affecting millions of Americans, which is unacceptable," Jepsen said.

"The time for empty apologies and hollow pledges of cooperation is over. It's up to Volkswagen to live up to its promises and obligations to consumers – and that starts by being honest with the American public, providing regulators with requested documents and coming clean on how they intend to address the very real problems with their vehicles."

Volkswagen is extending its emissions compensation program to owners of 3.0-liter diesels, offering $500 in cash and $500 credit to owners of 2009-16 diesel-powered Touaregs. Audi says a similar program is in the works for its larger diesels.

It's a goodwill gesture intended to mollify consumers who thought their "clean diesel" VWs met or exceed emission standards, only to find out they were equipped with deceptive software that reduced emissions only when the cars were being tested. The rest of the time they emitted as much as 40 times the legal limit of pollutants.

VW had earlier extended a similar "goodwill" offer to hundreds of thousands of owners of smaller 2.0-liter diesels. The compensation extended to 482,000 owners of 2009-15 2.0-liter diesel cars. 

Speaking at the Detroit auto show today, VW of America CEO Michael Horn said 265,000 owners of cars equipped with the 2.0-liter diesels have signed up for the $1,000 credits and 135,000 have received them.

A German newspaper report says Volkswagen may buy back about 115,000 cars in the United States as a result of the "dirty diesel" scandal. Another 450,000 will need extensive retrofitting to meet U.S. emission standards, the report said.

The Sueddeutsche Zeitung said that VW expects it will have to either refund the purchase price or offer owners a new car at a significant discount. It's thought that would apply to older cars that would be too expensive to retrofit.

Even newer cars will require extensive -- and expensive -- work, as parts of the exhaust system will have to be rebuilt, the report said. 

Although Volkswagen says it will continue producing diesels for the U.S. market, it is also talking up plans to build more electric cars. At the Consumer Electronics Show, it displayed mock-ups of an electric model that's a modernized remake of the VW minibus. 

Reports earlier this week said VW was apparently doing some behind-the-scenes maneuvering to reduce its liability to class-action lawsuits. A bill in Congress, dubbed the "VW bail-out bill" by critics, would make it harder to assemble large groups of consumers to pursue class-action cases.

The measure is sponsored by Rep. Bob Goodlatte, a Virginia Republican. Volkswagen's U.S. headquarters is in Virginia, near Dulles Airport.

The Justice Department today hit Volkswagen with a lawsuit charging that the automaker violated the Clean Air Act by installing defeat devices on some VW, Audi, and Porsche diesel vehicles that would not otherwise have met federal emission standards.

Possible penalties could reach into the billions of dollars and criminal charges against VW are still possible, Justice Department officials said. The automaker also faces numerous class action lawsuits filed on behalf of consumers, as well as actions by regulators around the globe. 

“Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors,” said Assistant Attorney General John C. Cruden.

Noting that it has been several months since the defeat devices were discovered, the government made clear its patience with VW is wearing thin.

“So far, recall discussions with the company have not produced an acceptable way forward. These discussions will continue in parallel with the federal court action,” said Cynthia Giles, assistant administrator of the Environmental Protection Agency.

“With today’s filing, we take an important step to protect public health by seeking to hold Volkswagen accountable for any unlawful air pollution, setting us on a path to resolution,” Giles said.

600,000 sold

The complaint formally lists the allegations that have dribbled out over the last several months, charging that nearly 600,000 diesel engine vehicles had illegal defeat devices installed and that Volkswagen violated the Clean Air Act by selling cars that are designed differently from what Volkswagen had stated in applications for certification to EPA and the California Air Resources Board (CARB).

"The alleged misrepresentations allowed almost 600,000 diesel engines to emit excessive air pollution across the country, harming our health and cheating consumers,” said U.S. Attorney Barbara L. McQuade for the Eastern District of Michigan.

In particular, the complaint alleges that the deceptive software allowed the nearly 600,000 vehicles to emit up to 40 times the allowable level of nitrogen oxide (NOx), which the complaint said contributes to harmful ground-level ozone and fine particulate matter.  

Health effects

"These pollutants are linked with asthma and other serious respiratory illnesses. Exposure to ozone and particulate matter is also associated with premature death due to respiratory-related or cardiovascular-related effects. Children, the elderly and people with pre-existing respiratory disease are particularly at risk of health effects from exposure to these pollutants," the Justice Department said in a prepared statement.

"Recent studies indicate that the direct health effects of NOx are worse than previously understood, including respiratory problems, damage to lung tissue and premature death."

Models named

Affected 2.0 liter diesel models and model years include:

Jetta (2009-2015)
Jetta Sportwagen (2009-2014)
Beetle (2013-2015)
Beetle Convertible (2013-2015)
Audi A3 (2010-2015)
Golf (2010-2015)
Golf Sportwagen (2015)
Passat (2012-2015)

Affected 3.0 liter diesel models and model years include:

Volkswagen Touareg (2009-2016)
Porsche Cayenne (2013-2016)
Audi A6 Quattro (2014-2016)
Audi A7 Quattro (2014-2016)
Audi A8 (2014 – 2016)
Audi A8L (2014-2016)
Audi Q5 (2014-2016)
Audi Q7 (2009-2015)

It's been a bad year for Volkswagen and an even worse year for Volkswagen owners, who find their cars' resale value trashed and fear that they have been unwittingly poisoning their fellow Earthlings. 

But time marches on and VW is fighting to recover from the Dirty Diesel scandal. How? Why, through advertising and public relations, of course. It's taking a bold move -- ditching its "Das Auto" slogan, widely used since 2007 when it replaced the little-mourned "Fahrvergnügen."

Instead of the rather drab "Das Auto," which after all simply means "the car," VW will be rolling out its bold new slogan soon.

"Wherever our logo appears in future, it will be backed by the new brand slogan 'Volkswagen,'" a VW spokesman said, according to Reuters. "The slogan will be rolled out in stages across the world."

No, it's not a misprint. Volkswagen's new slogan will be "Volkswagen."

Reuters quoted a VW executive who attended a recent strategy session in Dresden as saying that the old "Das Auto" slogan was seen as absolutist. You know, sort of stiff and elitist. The new one -- "Volkswagen" -- well, it's supposed to be more humble.

Head-hanging

After months of what has been seen in many quarters as arrogance and defensiveness and even outright prevarication at times, VW is trying to loosen up, show some humility, and be more open about its internal problems, even while claiming it has no idea who might have tinkered with the emissions control systems on its diesel engines.

Wags have compared this to O.J. Simpson's oft-repeated pledge to find the fiend who murdered his wife and a friend. 

But just to illustrate the depth of its commitment to a new openness, Volkswagen suggested that its executives ditch the neckties at the Dresden strategy session and some reports have even said that as a team-building exercise, top VW brass folded shirts together.

Volkswagen obviously will stop at nothing to win back consumers' confidence.

Volkswagen has announced the appointment of attorney Kenneth Feinberg to design and administer a program to address claims related to the 2.0L and 3.0L TDI vehicles affected by the diesel emissions scandal.

If that name sounds familiar, it should. Feinberg has been the point man for major claims settlements for more than a decade. His appointment is the clearest signal yet that Volkswagen is prepared to write some big checks.

“We are pleased to announce the retention of Kenneth Feinberg,” said Michael Horn, President and CEO, Volkswagen Group of America. “His extensive experience in handling such complex matters will help to guide us as we move forward to make things right with our customers.”

That experience includes being appointed by then-Attorney General John Ashcroft to administer the September 11^th Victims Fund. In 2010, when a BP oil rig exploded in the Gulf of Mexico, spilling millions of gallons of crude, President Obama and BP's chairman agreed on Feinberg to run the claims process that handed out billions of dollars in checks.

Major step

“This is a major step in resolving Volkswagen’s diesel challenges,” said Karl Brauer, senior analyst for Kelley Blue Book. “The company’s TDI customers are some of its most loyal and passionate, which is why many have felt so disappointed by the events of the past few months. Feinberg’s experience in organization and resolving matters between customers and large corporations is exactly what VW needs right now.”

Michelle Krebs, senior analyst for Autotrader, cut straight to the chase.

“Kenneth Feinberg has become the go-to money dispenser for companies with problems that require payouts to customers,” she said.

Starting immediately

In good news for affected owners, VW said Feinberg will immediately get to work on designing an independent claims process for consumers who own the affected vehicles.

Horn said the company hopes to have a claims program in place as soon as it is practicable.

“In order to do so, we will need the input not only of Volkswagen, but also vehicle owners, their lawyers, and other interested parties,” Horn said.

For consumers with a vested interest in the outcome of this latest development, information is available here.

There has been no shortage of bad news coming from Volkswagen lately. The company has suffered multiple emissions scandals and faces an uphill climb as they try to recall millions of vehicles equipped with defeat devices meant to cheat nitrogen oxide emissions standards.

Although things are still pretty bleak, the company can breathe a sigh of relief after getting the results of their internal investigation; it found that only 36,000 vehicles (instead of a previously estimated 800,000) have issues with carbon dioxide (CO2) emissions.

Carbon dioxide scandal

The CO2 issue was originally discovered after a company review of processes and workflows connected to models with diesel engines. Investigators discovered that carbon dioxide and fuel consumption figures were set too low for an unspecified number of vehicles during the carbon certification process.

At the time, company officials did not know exactly how many vehicles were affected, but they had an estimate – and the economic implications did not look good. “Based on present knowledge around 800,000 vehicles from the Volkswagen Group could be affected. . . An initial estimate puts the economic risks at approximately two billion euros (about $2.19 billion),” the company said in a statement.

Now that the affected number of vehicles has been reduced to 36,000, the company will probably be looking at a diminished economic impact. However, VW has not confirmed this estimate yet. “The negative impact on earnings… has not been confirmed,” said VW. “Whether we will have a minor economic impact depends on the results of the remeasurement exercise.”

Car companies are once again pitching new cars as Christmas presents, but chances are there will be fewer Volkswagens under the tree this year.

Industry sources report that the VW brand continues to suffer from the diesel emissions cheating scandal. Sales of used VWs are down and so are prices.

The buyer intelligence site Autolist has released its analysis of data through November 30. It finds the pricing data pretty much confirms the public narrative: things just keep getting worse for Volkswagen cars and dealers.

Among the findings – even VW vehicles that have nothing to do with the emissions scandal are starting to feel its effects. Vehicles bearing the VW nameplate, but untouched by the scandal, have now fallen to 2% below their expected value, demonstrating how the scandal just keeps spreading.

$1,500 discount

To move VWs off the lot, dealers have been forced to keep dropping the price. Autolist reports sticker prices for vehicles directly implicated in the scandal have now fallen $1,500 to nearly 5% below their expected value.

But even lower prices don't always help. For VWs, time on the market is running 47% above average, at 136 days.

New Volkswagens aren't selling that fast either, and those that do sell often come with generous incentives. In its report on November new car sales, Kelley Blue Book (KBB) noted the growth average transaction price (ATP) grew only modestly, climbing just 0.4%.

One reason was a decline in the Volkswagen Group's ATP. While VW prices dipped 0.1% from October, the ATP was down 0.2% from November 2014.

Companies are often tempted to "sit out" scandals and other bouts of bad publicity, but Gallup finds that may not be possible for Volkswagen. Fully three quarters of respondents say they are familiar with the VW "dirty diesel" scandal that came to light in September.

Not only is awareness high but consumers are taking it seriously. Four in 10 (41%) say VW's use of deceptive software to trick emissions testing equipment makes them less likely to buy a Volkswagen, while 29% say the news will have no impact on their future buying decisions. Another 28% said they would never have considered buying a Volkswagen in the first place. 

When it comes to Volkswagen's reputation, the majority of consumers (69%) believe the emissions scandal will have a major or moderate impact on its brand, Gallup said.

Gallup also asked respondents to use three words or short phrases to describe the Volkswagen brand. Based on a brand analysis, Gallup determined that Volkswagen's desired or projected brand could most accurately be described using words such as "reliable," "fun" and "environmentally friendly."

But that message is no longer getting through. A mere 1.6% of respondents used these or other keywords that aligned with the Volkswagen brand, while 16% used words such as "dishonest," "liar" and "cheater" to describe the company's brand.

Down but not out

In Gallup's analysis, the VW brand is down but not out. It has a core group of customers who strongly believe in its brand.

About seven in 10 fully engaged customers say the Volkswagen scandal has no impact on their decision to purchase from the brand (71%); only 37% of actively disengaged customers say the same. Instead, two-thirds of actively disengaged customers say that they are less likely to purchase a Volkswagen.

Volkswagen's recovery will depend on rebuilding brand trust first with customers who are not fully engaged and then with new customers, Gallup analysts said.

Legal challenges

Besides the court of public opinion, VW faces an enormous number of competing lawsuits and regulatory actions. In New Orleans today, federal judges are trying to devise a strategy to speed things along. They're likely to consolidate most of the consumer cases and assign them to an appropriate court.

There's not much legal controversy involved. Volkswagen has already admitted rigging its 2.0- and 3.0-liter diesel engines to produce artificially low emissions when hooked up to testing equipment. The only real issue is how consumers should be compensated for the reduced value of their cars and for punitive damages.

The company has set aside about $20 billion to cover legal and recall costs. 

Audi is trying to move the "dirty diesel" scandal into the rear-view mirror. It is preparing to submit plans for revised emissions control software that it says will resolve problems affecting the 3.0-liter TDI engines in Audi, Porsche, and Volkswagen vehicles.

Audi executives say the plans are a result of recent discussions with the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) and says it will install the software as soon as it is approved by the agencies.

Audi was dragged into the larger controversy surrounding its parent company, Volkswagen, when it was discovered that some of the auxilary emission control devices (AECDs) on its diesel engines were not properly described in the applications submitted for U.S. approval when the engines were developed.

Volkswagen has insisted its 3.0-liter diesels are not affected by the illegal "defeat devices" found on the 2.0-liter VW TDI engines. The Audi 3.0-liter engines were developed by Audi and are used in certain Audi and Porsche vehicles, as well as the VW Toureg. 

Defeat device 

One of the AECDs on the Audi engines is regarded as a "defeat device" under U.S. law, Audi conceded. It turns on emission control systems when the cars are being tested and turns it off when the tests are over, causing the cars to appear to meet pollution standards while in ordinary, everyday use they may be emitting more pollution than the law allows. Audi describes that device as "the software for the temperature conditioning of the exhaust-gas cleaning system."

"Audi has agreed with the environmental authorities on further steps of cooperation in which the concrete measures to be taken will be specified. The company has committed to continue cooperating transparently and fully," Audi said in a prepared statement. "The focus will be on finding quick, uncomplicated and customer-friendly solutions."

This engine was developed by Audi and is used in U.S. Audi models A6, A7, A8, Q5, and Q7 from model year 2009 onwards. Volkswagen uses the engine in the Toureg and Porsche and has used it in the Cayenne since model year 2013.  

Like a cloud of billowing smoke, the Volkswagen dirty diesel scandal just keeps expanding. The Environmental Protection Agency now says that at least 85,000 additional VW, Audi and Porsche vehicles are equipped with software allegedly designed to cheat emissions tests.

The EPA said today that Volkswagen and Audi officials yesterday admitted that the software that fudges on emissions tests was present on all vehicles powered by the VW group’s 3.0-liter diesel V-6 engine since the 2009 model year.

Previously, it had been thought that the deceptive software was present on about half a million 2.0-liter TDI diesel models and about 10,000 3.0-liter engines. But now the EPA and the California Air Resources Board (CARB) say the software exists on an additional 75,000 VW, Audi and Porsche cars and SUVs.

In a related development, a CARB official said it is "likely" VW will buy back at least some of the cars containing the 2.0-liter TDI "Clean Diesel" engines.

CARB Chairman Mary Nichols told a German newspaper the agency expects that vehicles with the first generation of VW’s 2.0-liter diesel engine will require a hardware “retrofit” to bring their emissions into compliance. The trouble is, Nichols said, such retrofits have struggled to achieve their intended goals in the past.

“We have seen in the past that retrofit devices just don’t work as well as they are intended to, even if it is being done by the original manufacturer,” Nichols told Handelsblatt. “So I think it is quite likely that they will end up buying back at least some portion of the fleet from the current owners.”

Volkswagen has lately been downplaying the likely cost of the scandal, painting a positive picture for financial analysts at the same time it cuts its capital budget 8% to free up money to repair or replace the affected models.

Software changes

“We are fully cooperating with the environmental authorities and working on concrete measures that will resolve this situation,” said Jeri Ward, Audi of America communications chief. “We’ll need some software changes in the future that will ultimately resolve this and there are more discussions that will be needed with the agencies.” 

Ward acknowledged that the software was used on all 3.0-liter diesels since the 2009 model year, according to Automotive News.

VW, Audi and Porsche have halted sales of diesel models pending the outcome of the inquiry.

VW executives met with officials of the EPA and CARB yesterday and informed them that the illegal "defeat devices" had been found on the additional models.

The illicit software basically recognizes when a car is undergoing an emissions tests and activites pollution-control equipment that is automatically turned off when the test is ended.

With all of the controversy surrounding Volkswagen and their emissions scandals, the company has decided to extend a period of amnesty to all of its employees so that they can come forward with any information about cheating within the organization.

While airing out any other potential problems could help VW move forward accordingly, employees better act quickly – the amnesty period will only be extended until the end of the month. Employees that come forward before November 30 will be able to keep their jobs and avoid damage claims from the company.

Amnesty period

Executives have made it clear that they want all available information on further cheating as quickly as possible. “In this process, every single day counts. . . We are counting on your cooperation and knowledge as our company's employees to get to the bottom of the diesel and CO2 issue,” said Herbert Diess, head of the VW brand, in a letter posted on the company's corporate intranet.

Eligible staff members will be protected by the amnesty because of provisions included in the company's collective bargaining agreement. This doesn't mean that there won't be some repercussions to coming forward though. Depending on the nature of the information, employees may be transferred or given other job responsibilities in the future.

Manipulating data

The amnesty offer comes after employees reportedly told the company about the carbon emissions issue that was exposed last week. Employees admitted that they had tampered with emissions data in order to reach the goal set by former VW CEO Martin Winterkorn.

Engineers at the company manipulated tire pressure readings and mixed diesel fuel with motor oil to make vehicles appear to use less gas. These practices stretched from 2013 until the spring of this year.

“Employees have indicated in an internal investigation that there were irregularities in ascertaining fuel consumption data,” said a VW spokesman. “How this happened is subject to ongoing proceedings.”

In the U.S., the Environmental Protection Agency (EPA) accused Volkswagen of violating the law when it was discovered that software in some diesel cars manipulated emissions in order to fool testing equipment.

The scandal quickly spread to Europe, where Volkswagen is based and where it sells more cars. European counterparts to the EPA began their own investigations, hauling VW executives before investigating panels.

But it's possible the software is not illegal in Europe.

The software at issue is what governs VW's TDI emissions. It is able to detect when the vehicle is attached to a testing device and regulates the emissions output to meet official guidelines. Once the test is over, it readjusts emissions that may be up to 40 times above legal levels in the U.S.

In a letter to a member of the British Parliament, Paul Willis, Managing Director of Volkswagen Group UK, first raised the possibility that VW hadn't actually broken a law when it deployed software to get around strict emissions levels.

Not problematic

“I would now like to share with you that we have just received confirmation that the KBA does not regard the use of this technology in the EU as problematic and thus, being in line with the current legislation,” wrote in a letter to Member of Parliament Louise Ellman.

Meanwhile, the New York Times quotes an EU spokeswoman as saying the EU had no formal view on whether the vehicles sold in the U.S. had a defeat device in the EU legal sense. She said the probe of cars sold in Europe is ongoing.

What's it mean for Volkswagon? Potentially billions of dollars. The company likely faces economic penalties in the U.S., but should European authorities conclude the software is legal, the German automaker could potentially reap huge savings in fines and legal fees.

Greater economic impact

According to the Times, most of the 11 million cars that have the software defeat device are in Europe, with only 500,000 or so in the U.S. It could turn out that VW's biggest economic hit will come in reduced demand for its cars, because of the adverse publicity.

Last month Kelley Blue Book reported that the average auction price for Volkswagen diesel models dropped by nearly 16% since the news broke of the emissions crisis. The brand's gasoline-powered vehicles weren't spared, with their auction prices declining an average 2.9%.

"According to Kelley Blue Book Field Analysts, some auctions are still holding off on selling the affected Volkswagen inventory," Tim Fleming, analyst for Kelley Blue Book said last month. "While Volkswagen diesel auction prices are in decline, we could see larger fluctuations depending on how this inventory is handled."

After being involved in two emissions scandals, repairing relations with customers may very well be a long and grueling process for Volkswagen. While the full gravity of the fallout is not yet certain, the company is already trying to ease tensions by offering $1,000 to consumers who own one of their diesel vehicles.

VW announced this initiative on Monday and will be splitting the $1,000 payment in two different ways -- $500 will be put onto a Visa prepaid card to be used freely by the consumer; another $500 dollars will be counted as credit towards a future VW purchase that comes with three years of roadside assistance.

While the payments may help assuage angry feelings for some consumers, others will be looking for VW to continue their work in recalling environmentally unfriendly vehicles. “We are working tirelessly to develop an approved remedy for affected vehicles,” said President and CEO of the Volkswagen Group of America, Michael Horn. “In the meantime, we are providing this Goodwill Package as a first step towards regaining our customers' trust.”

Program qualifications

In order to qualify for the $1,000 payment, consumers will have to be the registered owner or lessee of a VW diesel with a 2-liter TDI engine bought on or before November 8. Eligible owners are prompted to visit this website and enter their Vehicle Identification Number (VIN), vehicle mileage, and contact information by April 30.

Consumers will also have to bring their vehicle(s) to a dealer in order to prove ownership and activate the gift cards. Any consumer who participates in the program does not have to sign a release of claims agreement against the company.

The program is now the second initiative that VW has started to mend relations with consumers. The company previously offered a $2,000 “loyalty bonus” for anyone leasing or buying a new car. The deal ended on November 2 and was offered to VW owners or their family members, as long as they lived at the same address.  

An automotive magazine reports that Volkswagen will shower diesel owners with money Monday as part of its effort to win back some of the goodwill squandered in the "dirty diesel" scandal.

The Truth About Cars says owners of cars equipped with the 2.0-liter TDI engine will get a $500 cash card they can use anywhere and a second card, worth between $500 and $750, that they can use only at VW dealers. Volkswagen has confirmed it will make an announcement Monday but hasn't gone into detail. 

VW is mired in an avalanche of lawsuits, investigations and regulatory probes following the revelation that its popular TDI "clean diesel" models were equipped with software that reduced noxious emissions when the cars were being tested, then reverted to a dirtier operating mode when the test was over.

The cash awards program will reportedly be announced Monday, Nov. 9. After that date, VW owners can go to www.vwdieselinfo.com/ and input their VIN number to find out if they qualify. About half a million cars with the dirty diesels were sold in the U.S.

The program is, for now, restricted to the 2.0-liter TDI engines found in post-2009 Volkswagen Golf, Jetta, Beetle and Passat models and Audi A3 diesels but could later be expanded to the 3.0-liter engines found in larger VWs, Audis and Porsches, the magazine said.

Cash to customers

In addition to handing out cash to customers, VW is offering dealers a subsidy that lets them take in VW diesels at the valuation they had prior to when the dirty diesel scandal broke this fall. Existing Volkswagen owners are also being offered a $2,000 loyalty discount. 

The subsidies and hand-outs are part of an effort to keep disgruntled customers from dumping their VW diesels and buying a different brand. Volkswagen is hoping to at least keep those disaffected consumers from dumping the brand entirely.

Whether customers will have to agree not to participate in any of the class action suits against Volkswagen in exchange for the largesse isn't known.

Still reeling from its diesel emissions scandal, Volkswagen has a new problem. About 800,000 of its vehicles understated CO2 emissions during tests.

In response to its admission that some of its TDI diesel cars were actually releasing as much as 40 times the allowable NOx into the atmosphere, the carmaker launched an internal investigation to see how that happened – and whether any other unpleasant surprises might be in store.

The company has now issued a painful clarification.

“During the course of internal investigations, irregularities were found when determining type approval CO2 levels,” the company said in a statement. “Based on present knowledge around 800,000 vehicles from the Volkswagen Group could be affected.”

What the investigation found

Here's what the investigation found. Under the ongoing review of all processes and workflows in connection with diesel engines, it was established that the CO2 levels and the fuel consumption figures for some models were set too low during the CO2 certification process. The majority of the vehicles concerned have diesel engines.

The majority, but not all. Some of the affected vehicles use gasoline – the first time the scandal has spread to that segment of the company's business.

“From the very start I have pushed hard for the relentless and comprehensive clarification of events,” said Matthias Müller, CEO of Volkswagen Aktiengesellschaft. “We will stop at nothing and nobody. This is a painful process, but it is our only alternative. For us, the only thing that counts is the truth. That is the basis for the fundamental realignment that Volkswagen needs.”

He said Volkswagen will cooperate with all responsible authorities and do everything possible to correct the CO2 classification for the affected vehicles.

Unhappy board

In a separate statement, Volkswagen's Supervisory Board said it is “deeply concerned” about the discovery of the CO2 irregularities.

“The Supervisory Board and the special committee set up for the purpose of clarification will meet in the very near future to consult on further measures and consequences,” the Board said. “The Supervisory Board will continue to ensure swift and meticulous clarification.”

Meanwhile, investors continue to punish the German carmaker, driving its stock lower. On the Frankfurt Stock Exchange, VW shares plunged 9% as news of the new emissions issue broke.

Consumers also appear to be handing out some punishment as VW did not take part in October's record sales, enjoyed by other car companies. While October sales industry wide were up double digits, VW managed only a fractional increase over October 2014.

And it was grateful for that.

"We would like to again thank our customers for their patience and loyalty," said Mark McNabb, chief operating officer, Volkswagen of America. "Volkswagen is committed to making things right and actively working to restore trust."  

The Environmental Protection Agency's (EPA) charge that Volkswagen's diesel cheating scandal is more widespread than originally reported brought shock from industry analysts and denial from the German automaker.

As we reported Monday, the EPA has determined that several VW, Porsche, and Audi models with 3.0-liter diesels have been found with "defeat device" software similar to that used on nearly half a million of the smaller TDI engines.

The agency issued a new Notice of Violation covering the 2014 VW Touareg; 2015 Porsche Cayenne; and 2016 Audi A6 Quattro, A7 Quattro, A8, A8L, and Q5 crossover.

“Permissible software”

But VW is denying the charges, with a company spokesman telling The Wall Street Journal that the cars contain “permissible software” and suggesting the U.S. government agency has an ulterior motive.

“What’s at issue here is clear – does the U.S. want competition in the American market or not?” the spokesman told the Journal.

In a separate statement, Porsche Cars North America said it was blindsided by the EPA finding.

“We are surprised to learn this information,” the statement said. “Until this notice, all of our information was that the Porsche Cayenne Diesel is fully compliant.”

Casting a shadow

But Karl Brauer, senior analyst for Kelley Blue Book (KBB), says the official expansion of the U.S. government probe casts a darker shadow on the entire VW Group.

“It also makes any past claims of ‘a limited number of people’ involved in the deception appear even more outrageous,” Brauer said. “Volkswagen would do well to immediately and completely disclose all people and products involved in this deception, no matter how far-reaching. Repairing the automaker’s brand and regaining trust should be VW Group’s highest priority at this point, but it can’t begin until full and voluntary disclosure is achieved.”

Fellow analyst Rebecca Lindland, senior director of commercial insights for KBB, says the EPA action Monday should not have come as a real surprise.

“This just makes official what we all suspected – no make or model was spared this treatment since the technology was shared across all diesel engines in the VW family,” she said.

Heftier fines and costs

Lindland says the result for the beleaguered automaker will be potential fines that will be even greater than first calculated, and more expensive fixes as well.

“Whatever compensation they come up with may satisfy a VW Jetta owner, but is less likely to satisfy a Porsche Cayenne owner who paid so much more for their vehicle,” Lindland said.

According to Car and Driver, the software the EPA says deceived emissions test equipment is used for cold starting diesel engines. It's perfectly legal for that purpose.

“However, Volkswagen violated the law by not disclosing this software to the EPA and by employing code that explicitly switched the car’s emissions system from a bench-testing mode that actually outperformed federal standards to allowing dirtier emissions under regular conditions,” the magazine explained.

In the month since the diesel cheating scandal broke, VW sales in the U.S. have taken a hit. The real impact from this latest EPA action, says Michelle Krebs, senior analyst at Autotrader, is the damage to the Volkswagen brand is likely to spread to the popular Audi brand as well.

It's not just the 2.0-liter Volkswagen TDI diesel engines that use illegal software to fool emission checks, the U.S. Environmental Protection Agency said today. 

The EPA says several VW, Porsche, and Audi models with 3.0-liter diesels have been found with "defeat device" software similar to that used on nearly half a million of the smaller TDI engines. 

The agency today issued a new Notice of Violation to Volkswagen, Audi, and Porsche saying that it found several models with the illegal defeat devices.

The models are:

• 2014 VW Touareg;
• 2015 Porsche Cayenne; and
• 2016 Audi A6 Quattro, A7 Quattro, A8, A8L, and Q5 crossover. 

The notice includes only models with the 3.0-liter diesel engine.

"Once again failed"

"The EPA's investigation into this matter is continuing," the notice said. "The EPA may find additional violations as the investigation continues." 

EPA said the software on the 3.0-liter engines increases emissions of nitrogen oxide (NOx) up to nine times the legal standard when the car is not hooked up to emissions-measuring equipment. 

“VW has once again failed its obligation to comply with the law that protects clean air for all Americans,” said Cynthia Giles, Assistant Administrator for the Office for EPA’s Enforcement and Compliance Assurance. “All companies should be playing by the same rules. EPA, with our state, and federal partners, will continue to investigate these serious matters, to secure the benefits of the Clean Air Act, ensure a level playing field for responsible businesses, and to ensure consumers get the environmental performance they expect.”

Both the EPA and the California Air Resources Board (CARB) are investigating the latest alleged violations. The new notice covers approximately 10,000 diesel passenger cars already sold in the United States since model year 2014. In addition, it includes an unknown volume of 2016 vehicles.

"On September 25, the California Air Resources Board sent letters to all manufacturers letting them know we would be screening vehicles for potential defeat devices,” said Richard Corey, Executive Officer of the California Air Resources Board. “Since then ARB, EPA and Environment Canada have continued test programs on additional diesel-powered passenger cars and SUVs.

"Serious concerns"

"These tests have raised serious concerns about the presence of defeat devices on additional VW, Audi and Porsche vehicles. Today we are requiring VW Group to address these issues. This is a very serious public health matter. ARB and EPA will continue to conduct a rigorous investigation that includes testing more vehicles until all of the facts are out in the open," Corey said.

As in the 2.0-liter engines, EPA said VW "manufactured and installed software in the electronic control module of these vehicles that senses when the vehicle is being tested for compliance with EPA emissions standards."

"When the vehicle senses that it is undergoing a federal emissions test procedure, it operates in a low NOx 'temperature conditioning' mode, EPA said. "Under that mode, the vehicle meets emission standards. At exactly one second after the completion of the initial phases of the standard test procedure, the vehicle immediately changes a number of operating parameters that increase NOx emissions and indicates in the software that it is transitioning to 'normal mode,' where emissions of NOx increase up to nine times the EPA standard, depending on the vehicle and type of driving conditions." 

Having to admit to a systematic design to circumvent emissions tests on its diesel cars was a blow to Volkswagen. What else could go wrong?

It could lose money. Lots of it.

The embattled German automaker reports losses of $3.9 billion in the third quarter. Admittedly, plenty of consumers were buying its cars during those three months. The loss is attributable to the billions of dollars the company has set aside to deal with the aftermath of the diesel scandal.

In its report, VW executives chose to focus on the positive. Sales revenue grew by 8.5% in the July through September quarter. Operating return on sales, before special items, amounted to 6.4%.

Core strength

"The figures show the core strength of the Volkswagen Group on the one hand, while on the other the initial impact of the current situation is becoming clear,” said Matthias Müller, Chairman of the Board of Management of Volkswagen Aktiengesellschaft. “We will do everything in our power to win back the trust we have lost."

But the future may be uncertain for Volkswagen and there could be more pain ahead. The quarterly report only reflects the initial weeks of the cheating scandal. A preliminary report this week from Kelley Blue Book projected a sharp drop in VW sales, suggesting the scandal has taken a toll on the brand, not just its diesel cars.

Analysts at Frost & Sullivan say VW's concession of corporate malfeasance in circumventing Environmental Protection Agency (EPA) testing in the U.S. can have impact on the entire industry.

Long-term sales decline

"As an immediate impact of the scandal, Volkswagen Group sales are expected to fall by 2% – 4% by 2020," said Arun Chandranath, Frost & Sullivan Automotive and Transportation Senior Research Analyst. "There will be a significant push towards alternate powertrains from both the industry and the consumer.”

As consumers become more leery of diesel technology, Chandranath believes hybrids will be the strongest benefactor. Hybrids offer high fuel efficiency with low emissions and are independent from a charging infrastructure. It's also a proven technology with plenty of available products.

Meanwhile, government regulators can be expected to tighten their standards. Frost & Sullivan predicts globally harmonized test procedures will be a vital strategy towards implementing worldwide test standards. This will ensure standardized emission and fuel testing so that the company can begin to regain consumer trust.

Not only does Volkswagen face punitive fines, lawsuits, and recall costs in connection with its diesel cars that cheat on emissions controls, its selling fewer vehicles.

And those that are selling are going at a discount.

Kelley Blue Book (KBB) reports that average auction prices, along with new-car shopping activity on KBB.com, for Volkswagen diesel vehicles have declined four weeks after the diesel emissions issue was announced. No surprise there.

The average auction price for Volkswagen diesel models dropped by nearly 16% since the news broke of the emissions scandal. The average auction price for the VW’s gasoline-powered vehicles declined by 2.9%.

On KBB.com, Volkswagen new-car shopping activity for affected TDI models has fallen, on average, by 2.4%.

“According to Kelley Blue Book Field Analysts, some auctions are still holding off on selling the affected Volkswagen inventory,” said Tim Fleming, analyst for Kelley Blue Book. “While Volkswagen diesel auction prices are in decline, we could see larger fluctuations depending on how this inventory is handled.”

According to KBB, the Volkswagen Golf SportWagen and Golf have seen the most significant declines in shopping activity, with decreases of 6.2 percent and 3.7 percent respectively.

The Audi A3 and Volkswagen Jetta SportWagen are the only TDI models seeing increases in activity, at 1.6% and 3% respectively. KBB says Audi A3 shoppers are increasingly cross-shopping competing luxury models following the announcement.

The most highly cross-shopped vehicles are the Lexus NX, BMW 2-Series, and Mercedes-Benz CLA.

Volkswagen already faces more than 400 lawsuits filed by U.S. consumers over its use of sophisticated computer software to cheat on emission tests as well as investigations by government agencies, but the latest lawsuit, if successful, may produce results that actually benefit the general public.

It was filed today by the Center for Auto Safety (CAS), a Washington, D.C. non-profit that has been battling the auto industry for 45 years. Unlike the private lawsuits which seek monetary damages for VW and Audi owners, the center’s suit seeks action to clean up the damage from VW’s actions and ensure the violations are not repeated.

Specifically, the lawsuit seeks an injunction ordering VW:

• To remediate the environmental harm caused by VW’s emissions relief,
• To appoint an independent organization to monitor VW’s compliance with state and federal laws as well as other relief granted in this lawsuit, and
• To order VW to pay a portion of its annual net profits into an independent fund administered by third parties to a non-profit organization to offset the environmental damage.

"Unprecedented corporate crime"

“CAS has sued VW and Audi because they committed an unprecedented corporate crime and fraud on the public that requires injunctive relief to remedy the harm caused by their violations of state and federal environmental and consumer protection laws,” said Clarence Ditlow, executive director of the center. “Class actions and government enforcement actions result in headlines, penalties and settlements that do nothing to change underlying corporate behavior or remediate the underlying damage caused by illegal behavior.”

Ditlow said other sanctions commonly imposed on automakers also fall short.

“The independent monitors and auditors sanctioned by the Justice Department and federal agencies are nothing more than corporate law firms and employees who are all too willing to sign off on the behavior of their employers in documents filled with withheld redactions. When so-called independent funds are set up as was done in the Toyota Unintended Acceleration class action, they go to auto company designed programs that benefit the auto maker, not the consumer,” Ditlow said, vowing that his group will get results.

“CAS will use its integrity and skills acquired through 45 years of battling the auto industry to ensure that this litigation will reform VW and Audi once and for all and set a precedent for all other auto companies in the future,” Ditlow said in an email to ConsumerAffairs.

Tired of waiting for Volkswagen, German authorities have rejected VW's proposal for voluntary repairs and ordered the automaker to get its recall of 8.5 million diesel-powered cars into gear.

In the U.S., the Environmental Protection Agency is waiting for VW to propose a remedy. The EPA will then study the proposed remedy to determine whether it is likely to work, a process that could stretch well into 2016.

The Federal Trade Commission has also opened an investigation into the deception, joining the Justice Department and the EPA, agency spokesman Justin Cole confirmed yesterday. At issue, presumably, are VW's advertisements touting its "clean" diesels. 

It was researchers in the United States who discovered that VW had rigged a "cut-out" that turned off much of the pollution control equipment on its diesel cars except when they are being inspected, allowing the cars to emit as much as 40 times the allowed amount of pollutants.

But the number of cars involved in the U.S. is relatively small, fewer than half a million. In Germany, by contrast, the illegal device is found on more than 8.5 million cars. Today's recall affects 2.4 million of them. It came after German Transport Ministry officials rejected VW's proposed fix.

A huge embarrassment

In the U.S., the scandal is a huge embarrassment for Volkswagen that many analysts say could permanently harm its brand but is not regarded as a national disgrace or a potential economic or environmental disaster.

In Germany, by contrast, the number of cars is not only much greater, but the importance of VW to the nation's economy is hard to overstate. German authorities, fearing that their entire auto industry could be harmed by the scandal, are increasingly impatient and determined to begin implementing a solution.

The recall ordered by the government will be much more expensive for VW since it requires the company to speed up the process and devote more time, money, and personnel to designing and implementeing a fix.

Under today's order, Volkswagen must share technical details of its solution with the government by mid-November and begin recalling cars in January. The government will test the recalled vehicles to be sure the repairs are successful.

For the sake of customers and the image of the automobile, “we will clear up what happened at Volkswagen,” Enak Ferlemann, state secretary in Germany’s Transport Ministry, said in a speech in the lower house of parliament, Bloomberg Business reported. “Germany will stay the No. 1 auto country.”

The latest lawsuit in the Volkswagen dirty diesel scandal seeks an immediate buyback of "clean" TDI diesels sold in California, arguing that the cars violate California's strict emissions laws.

The lawsuit follows Congressional testimony by VW executives who said the firm won't begin to recall its polluting diesels until 2016, and that the recall process could take a year or more.

“In a state where environmental protection is paramount, consumers in California have suffered greatly from VW's dirty diesels and its deception,” said Steve Berman, managing partner of the Seattle law firm Hagens Berman. “We believe California owners should not have to choose between either parking their cars and walking, or driving them and spewing illegal and dangerous compounds into the environment. They should not have to wait years or even months for Volkswagen to get around to fixing this.”

The lawsuit states that the tainted vehicles violate California law because by design, they were never intended to pass the state's emissions requirements and instead employed a defeat device which, during emissions tests, turns on full emissions controls -- but only during the test.

Warranty breached

“Under California’s stringent automobile emissions control laws, each vehicle purchased in the state must as a matter of law come with an express manufacturer’s warranty that the vehicle was ‘[d]esigned, built, and equipped so as to conform with all applicable regulations adopted by the Air Resources Board,’ the suit states. “Volkswagen Group of America, Inc. (“VW”) breached this express warranty with respect to each California Vehicle.”

According to the suit, “Under applicable California express warranty law, VW must ‘promptly’ offer to accept the return of non-conforming vehicles and to provide replacement vehicles or restitution of the purchase price (among other remedies) unless it can make them ‘conform to the applicable express warranties after a reasonable number of attempts.’”

The suit further alleges that Volkswagen admits it cannot presently make the required repairs and its own timetable would have owners wait months, or even years for a suitable repair.

The suit covers these diesel VWs:

• Jetta (model years 2009 – 2015),
• Beetle (model years 2009 – 2015),
• Audi A3 (model years 2009 – 2015),
• Golf (model years 2009 – 2015) and
• Passat (model years 2014 – 2015).

Hagens Berman's suit quotes VW owners who feel that Volkswagen has committed consumer fraud, leaving them with either an illegally polluting car, or what will become a recalled, underperforming vehicle whose value has sharply declined.

Joining Hagens Berman in the suit is business litigation firm Quinn Emanuel.

The pressure is building on Volkswagen in the wake of the automaker's admission that it installed software in its “clean diesel” cars to pass mandated emissions tests, when the vehicles were actually operating at 40 times over the Environmental Protection Agency (EPA) standard.

Besides the legal and public relations disaster VW has on its hands, it faces another stern test. Somehow it has to “fix” the problem on the millions of cars that have the technology.

One would think that if the problem could have been easily fixed, the company would have done that in the first place, rather than take the enormous risk that cheating on the emissions test entailed.

Might not be that complicated

Actually, the fix might not be all that complicated, according to Ta-Jen Huang, a chemical engineering professor at National Tsing Hua University in Taiwan. Huang says replacing the Selective Catalytic Reduction (SCR) system on current VWs with what he describes as the Electro-Catalytic Honeycomb (ECH) system would solve the problem.

As we reported last week, the SCR system has significant drawbacks. This system uses a technology bearing the trade name “AdBlue” to convert diesel fuel's toxic NOx by-product into harmless nitrogen via various chemical reactions in a special SCR that has been optimized for NOx reduction.

According to Empa Laboratory of Automotive Powertrain Technologies director Christian Bach, SCR systems are considerably more complex than a conventional three-way catalytic converter in gasoline engines. AdBlue is carried in a separate tank in the car and needs to be topped off every now and again, usually while the vehicle is being serviced. The AdBlue dosage needs to be set precisely to the amount of NOx emitted by the engine.

If the dosage is too low, it doesn't reduce NOx emissions enough to meet the standard. Too high a dosage and the result is undesirable ammonia emissions. In short, diesel SCR systems can yield unpredictable results.

Zero emissions

Huang believes replacing the SCR system with the ECH system can treat diesel exhaust to zero emissions. But what does that do to fuel economy?

“The fuel economy with replacing the SCR with the ECH can be kept at least the same or even be increased,” Huang told ConsumerAffairs. “In fact, the electro-catalytic honeycomb (ECH) can maximize both the performance and the fuel economy, with possible zero air pollution, without consuming any resource.”

Huang provided a graphic showing how the ECH system works (shown above). He says it's an easy fix on cars equipped with existing SCR technology, only requiring the replacement of a section of the tail pipe.

”This only needs to replace the section of the SCR converter by the ECH, which is a honeycomb in a size similar to the SCR catalyst honeycomb,” Huang said. ”The consumer may not see any difference on this fix.”

If the fix is that simple, one has to wonder why it hasn't been adopted before. But Huang said he believes it is the answer, and that VW is well aware of it. He quotes engineers at VW Group as saying they believe the ECH system ”has big potential.”

Consumers, car dealers, environmentalists, regulators, they're all mad at Volkswagen. And now you can add the U.S. Senate. It turns out that consumers who bought VW's "clean diesels" slurped up $50 million or so in "lean-burn technology motor vehicle" tax credits.

The top two senators on the Senate Finance Committee have written to Volkswagen, giving the company until Oct. 30 to answer some tough questions about whether those credits were justified.

"Volkswagen fleeced Oregonians and Americans across the country by selling 'clean' diesels secretly equipped with defeat devices (that hid their true emissions)," Sen. Ron Wyden (D-Ore.) said in a blog posting that claimed Oregonians own more VW diesels per capita than residents of any other state.

Wyden and Senate Finance Committee Chairman Orrin Hatch (R-Utah) said they are "launching a bipartisan investigation into VW’s cheating – cheating that millions of taxpayer dollars inadvertently subsidized because of VW’s deception."

Certified by Volkswagen

It all has to do with something called the Alternative Motor Vehicle Tax Credit, passed by Congress in 2005 to encourage taxpayers to buy high-efficiency, low-polluting cars. To qualify, manufacturers had to certify that their vehicles met certain standards, after which consumers could claim the tax credit, the senators note in their letter to Volkswagen.

In 2008, Volkswagen certified to the Internatl Revenue Service that the 2009 VW Jetta TDI sedan and SportWagen qualified for $1,300 tax credits based on their supposedly clean emissions profile. More VW and Audi vehicles were added later.

About 60,000 of the cars were sold by July 1, 2010. The credit was then cut in half until it expired on Dec. 31, 2010. Using those figures, the senators calculated the loss to American taxpayers at "well over $50 million."

In their letter, the senators give Volkswagen until Oct. 30 to produce documents relating to the tax credits. 

House holds a hearing

The letter was sent to VW CEO Matthias Muller and Michael Horn, president and CEO of Volkswagen Group of America. Horn is on Capitol Hill today, testifying before the House of Representatives Energy and Commerce Committee, which is also looking to grill VW and EPA officials.

In advance of today's hearing, the EPA told U.S. lawmakers it could not divulge new details about its probe since it is still conducting its investigation. Previously, officials have said that VW deceived regulators by building the "cut-out" software that turned on emission controls when vehicles were being inspected, then turned it off when the inspection ended. 

In written testimony prepared for today's House hearing, officials said VW also conspired to cover up evidence of its deceptive actions.

Besides various federal investigations, VW also faces a flood of consumer lawsuits and investigations by state attorneys general, including New York's Eric Schneiderman. 

"No company should be allowed to evade our environmental laws or promise consumers a fake bill of goods. That is why my office is investigating troubling reports that millions of Volkswagen cars carried software designed to cheat emissions tests that protect our environment," Schneiderman said. "We look forward to collaborating with Attorneys General across the nation on this matter.”

Repair or replace -- those are basically the options Volkswagen faces as it tries to figure out what to do about 11 million diesel-powered cars that were sold with software that intentionally gives incorrect emission readings.

The most extreme option is replacing some or all of the cars. The simplest is reprogramming the software that controls the emission system. Whatever happens, Volkswagen says recalls will begin in January and are expected to be completed by the end of 2016, a VW spokesman said.

Whatever VW is going to do, it needs to make up its mind. German regulators have set a deadline of today (Wednesday, Oct. 7) for the company to present a preliminary plan, Bloomberg Business reports. 

Since numerous models are equipped with the deceptive software, there may be different fixes for different models. Some models might get by with a reprogramming, others with a bigger catalytic converter. But in some models, a more expensive and complicated solution may be needed.

There's also the problem of performance and fuel economy. Some of the simpler solutions could solve the emissions problem but reduce the car's acceleration and mileage, likely leading to customer dissatisfaction and litigation.

Lawsuits piling up

And speaking of litigation, lawsuits against VW are piling up. Nearly 230 class-action suits have been filed in 37 U.S. states. And now West Virginia looks to become the first state to file against Volkswagen on behalf of VW owners.

West Virginia Attorney General Patrick Morrisey filed suit Friday seeking compensation for 2,684 VW diesel owners in his state. The suit seeks restitution of up to $6,855 per car plus $5,000 for each violation of the state's consumer protection law.

“West Virginia consumers responded to Volkswagen’s advertising by purchasing TDI clean diesel models, expecting that their vehicles would be environmentally friendly, fuel efficient, and high performance as advertised.” Morrisey said. “According to the complaint, Volkswagen will not be able to comply with the EPA order to make the affected vehicles comply with emissions standards without substantially degrading their performance and fuel efficiency to a level below what was advertised.”

West Virginia's first-in-the-nation filing is appropriate since it was a May 2014 study conducted by the Center for Alternative Fuels, Engines & Emissions at West Virginia University that first found elevated levels of emissions on several Volkswagen cars.

Their data was then turned over to the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board, leading to the current crisis that threatens VW's brand and leaves consumers in limbo.

Volkswagen's use of software to falsify emission measurements of its TDI diesel engines is estimated to have killed dozens of Americans, the Associated Press reports.

The news agency said it's likely that between five and 20 people died in the U.S. during each of the seven years the VW emission-falsifying software was in use -- a potential total of nearly 100 deaths.

The death and illness toll would be much higher in Europe, where VW sold millions of the "clean diesel" engines compared with fewer than half a million in the U.S.

The illegal software used by VW allowed its diesel cars to spew up to 40 times more nitrogen oxides (NOx) than allowed by U.S. clean air regulations. The nitrogen oxides contribute to smog, which is harmful to asthma sufferers as well as lung and heart disease patients.

Diesel engines also emit fine particulate matter, commonly called "soot," which can lodge in the lungs and cause severe health problems. Diesel engines are the third-largest human-made source of soot, estimated to cause about 15,000 deaths a year in the United States, according to the Environmental Protection Agency.

Heart attack trigger

A 2011 study in The Lancet concluded that traffic exposure is the single most serious preventable trigger of heart attack in the general public, causing 7.4% of all attacks.

The EPA says that diesel engines also contribute to acid rain and global climate change. The World Health Organization said in 2012 that diesel exhaust had been conclusively shown to be a cause of cancer in humans. 

However, a study earlier this year found no link between the exhaust from "new technology diesel" engines and lung cancer. The study, issued in January by the Health Effects Institute also confirmed that the concentrations of particulate matter and toxic air pollutants emitted from new-technology engines are more than 90% lower than emissions from traditional older diesel engines.

The study exposed laboratory rats, for 80 hours a week and up to 30 months, to emissions from a heavy duty diesel engine meeting 2007 U.S. EPA standards that use new filters and other control technology to reduce emissions significantly. In contrast to previous health studies, the study found that lifetime exposure did not induce tumors or pre-cancerous changes in the lung, although it said "a few mild changes" were seen in the lungs.

VW unaware

Volkswagen said it was unaware of any deaths resulting from the emissions tinkering. 

"General allegations regarding links between NOX emissions from these affected vehicles and specific health effects are unverified. We have received no confirmed reports that the emissions from such vehicles caused any actual health problem," the company said in a statement.

Volkswagen is pulling together plans to recall and retrofit 11 million diesel-powered cars worldwide. At the same time it is trying to retrofit its brand from the damage done by the revelation that it used software to fool emissions testing equipment. 

VW's new CEO, Matthias Mueller, said that "in the next few days," the company will begin asking customers to bring their cars in to have the illegal software deactivated, a campaign that some experts say could cost more than $6 billion. 

Fewer than half a million of the cars are in the United States but they constitute nearly all of the cars VW sold here under its much-ballyhooed TDI "clean diesel" label. 

The company has set up a website for U.S. customers that includes an apologetic statement from Michael Horn, CEO of Volkswagen Group of America.

In his statement, Horn emphasizes that VW and Audi diesel-powered cars are safe and legal to drive.

Legal blizzard

The company faces a blizzard of class-action lawsuits and pending criminal and civil actions by federal and state authorities in both the U.S. and Germany.

The consumer class-actions mostly reflect owners' concenrs that their cars have lost resale value as a result of the stealth software that turned emission controls on full-blast only when the cars were undergoing periodic emissions tests. The rest of the time, emissions were as much as 40 times the legal limit.

Customers are also worried that, once the retrofit is completed, their cars will not be as peppy and will not achieve the fuel economy that they do now.

Besides the pending fines, penalties, litigation, and lost sales, Volkswagen is being severely punished by stock markets, where falling stock prices have wiped out more than one-third of the company's market capitalization.

The Volkswagen "dirty diesel" scandal is starting to have overtones of Watergate. Every few days we're brought fresh news of yet another transgression, cover-up, or evasion.

The latest affects Audi, VW's upscale brand sometimes referred to as Volkswagen's Lexus. Audi today said that 2.1 million of its diesel-powered cars are equipped with the same stealth software as its downmarket VW brethren.

"We are working at full speed to find a technical solution," said Audi spokesman Juergen de Graeve, Bloomberg Business reported. "Once we have that solution, we will write to customers and we will upgrade the cars so that they are within emissions regulations.

Audi said the 2.1 million cars included the popular A4 sedan and Q5 SUV. Only 13,000 of the cars were sold in the U.S.

Ousted VW CEO Martin Winterkorn made much of his strategy of using interchangeable parts in the company's many brands, which include VW, Audi, Porsche, Seat, and Skoda.

Common components

Some analysts had questioned that strategy, saying it could spell disaster for the company if it had to recall a component common in many millions of cars. It is, of course, exactly that situation that VW now faces. It needs to replace or retool software in 11 million cars -- more than it sells in a year. About 5 million are VW brand cars, including Golfs, Passats, and Tiguans, according to Automotive News.

Winterkorn, meanwhile, is the subject of a criminal probe opened by prosecutors in Germany. Investigators are trying to determine who is responsible for scheming to circumvent emissions regulations.

But while trying to pin blame on someone, the German government is also “working hard to contain the damage,” according to Peter Altmaier, chief of staff to Chancellor Angela Merkel. He said in an interview with Bloomberg Television in Berlin that the government is keen to ensure that the reputation of German cars in general is “not damaged.”

What will be the impact on car buyers of the Volkswagen diesel emissions scandal? Will it dampen new car sales?

Most industry experts say it shouldn't. Edmunds.com says the scandal appears to have had very little impact on consumer confidence in the overall industry, even as it proves to be a self-inflicted wound for the German automaker.

"Volkswagen's deception is dominating headlines, but it is not keeping shoppers away from other brands' showrooms," said Edmunds.com Director of Industry Analysis Jessica Caldwell. "It puts the crisis in a little bit of perspective, since these Volkswagen diesels don't constitute a very big share of sales. It's also a reminder that buyers won't disappear from the market just because they suddenly can't or don't want to buy these affected cars. They're willing to turn to other automakers that will meet their needs."

BMW may stand to benefit from Volkswagen's woes, and the fellow German automaker is taking great pains to assure consumers that its clean diesel vehicles don't cheat. BMW said it has “clear, binding specifications and processes” in place through all phases of development at the BMW Group in order to avoid wrongdoing.

Cites studies

In a news release, the car maker said the International Council on Clean Transportation (ICCT) carried out two studies that confirmed the BMW X5 and 13 other BMW vehicles tested comply with the legal requirements concerning NOx emissions. No discrepancies were found in the X5 between laboratory-test and field-test NOx emissions, the company said.

BMW Group also said it is willing to discuss its testing procedures with the relevant authorities in the U.S. and other countries and would make any of its vehicles available for testing at any time.

The company said progress in meeting emissions goals has largely been accomplished with diesel technology and it is not backing away from diesel propulsion systems because of VW's problems. In fact, the company said meeting future requirements won't happen without diesel drive trains.

According to BMW, a diesel engine emits roughly 15% to 20% less CO2 on average than a comparable gasoline engine.

Refining and optimizing

“At the BMW Group, we have invested a great deal in recent years in refining and optimizing diesel technology,” the company said in a statement.

BMW has a lot riding on how consumers ultimately react since it is heavily invested,in diesel models, as are many other automakers. Diesel vehicles accounted for 38% of vehicles sold worldwide last year – mostly in Europe. Diesel is less of a factor in the U.S. since diesel-powered vehicles accounted for only 6% of total sales.

The U.S. Environmental Protection Agency (EPA) said last week that it is revising its emissions testing procedures to make it more difficult for a car maker to cheat. BMW said it supports efforts to bridge the gap between test results and real-life fuel consumption and emissions.

It's not just Volkswagen owners who are outraged over the Volkswagen dirty diesel scandal, dealers are angry too. In fact, the dealers were already fed up with slow sales that they blamed on VW's plodding pace in bringing new models to market, and many are right behind consumers in filing class action litigation against the company.

It might sound strange to consumers, but dealers stand to lose a lot more in the Volkswagen scandal than their customers do. After all, what's the worst that will happen to a VW owner? The cars aren't safety hazards and can still be driven; they stand to lose resale value and may take a performance hit when the emissions systems are straightened out, but no individual car owner is going to be wiped out financially.

Dealers, on the other hand, argue that they have already taken multi-million dollar hits in lost sales because VW was slow to update its model line-up. And now they stand to lose much more if consumers turn their backs and head over to the Kia or Nissan dealer. 

There's also the little matter of inventory. Volkswagen sales have been sluggish the last few years and if you look carefully at VW dealers' lots, you'll see they are bulging with unsold cars that appear as a huge liability on dealers' balance sheets. 

Bargain hunter's dream

Not to be crass, but there is one bright spot in the entire mess -- anyone looking for a new or used car should be able to drive a hard bargain and then drive off with lots of change jiggling in their pockets. 

Dealers live from month to month. Between now and the end of September, anyone who walks into a VW showroom with cash or good credit should be able to knock thousands of dollars off the going price for most models. 

Admittedly, this is not the time to buy a VW diesel, since no one knows what the emissions modifications will do to the cars' performance and fuel economy, but gas-powered Volkswagens are the same precision-engineered, fun-to-drive cars today that they were yesterday.

Consumers too often make buying decisions based on morality instead of their own self-interest. Whether you buy a VW or not doesn't really matter to Volkswagen, but if you can do so at a fire-sale price, it matters a lot to your bank balance. 

Headed for court

The mess that VW has made for itself also presents a sterling opportunity for the legal profession, which is letting no grass grow under its feet. Lawyers who specialize in the auto trades are tuning up their word processors and getting ready to head for the courthouse, Automotive News reports. 

“If I’m a VW dealer and they’ve made intentional decisions either in Germany or in Virginia, and those decisions damaged the brand, that hurts me as a dealer,” said Mike Charapp, a partner at Charapp & Weiss in McLean, Va., a McLean, Va., a firm that represents dealers, the trade journal reported. “I’m going to be looking at some potential recourse unless VW steps up and helps me with my business.

VW's U.S. subsidiary is headquartered in Herndon, Va., near Washington Dulles International Airport. The proximity to Dulles makes it easy for executives to fly back and forth to Germany.

It also makes it convenient for lawyers to shuttle into Dulles and head for the Fairfax County courthouse or the U.S. District Court in Alexandria. Reuters estimates that at least 25 class-action cases have already been filed, representing dealers in all 50 states. 

Besides lost sales, dealers will argue that the value of their franchises has been decreased -- even wiped out -- by Volkswagen's skirting of U.S. emission laws. The damages sought by dealers could easily exceed those sought by consumers and could even rival the $18 billion in potential fines.

Fahrvergnügen? Fuhgeddaboudit.

A consumer group says Volkswagen mut offer to buy back all of the "clean diesel" cars equipped with software that lets them slip through emissions tests.

“VW once was a company that brought us iconic cars like the Beetle and the flower-powered microbus, but now VW is just a big cheater, said Ed Mierzwinski, Consumer Program Director of U.S. PIRG. “VW CEO Martin Winterkorn resigned ... while claiming he committed 'no wrongdoing' but VW must still pay full penalties under law and grant full rebates to the customers it deceived into buying pollution-spewing cars that led to massive, undeserved profits.”

The Environmental Protection Agency (EPA) says Volkswagen built elaborate software — called a “defeat device” — to turn on emission controls during testing and turn them off during regular driving, emitting as much as 40 times the legal limit of smog-forming and lung-damaging pollutants.

“When they were caught, they denied it as long as they could but now VW admits it broke the law when it engaged in a scheme to trick pollution controls and ripped off hundreds of thousands of consumers who thought they were buying clean vehicles,” added Mierzwinski. “Our Make VW Pay Campaign will hold VW fully accountable while preventing future corporate lawbreaking that cheats consumers or places health, safety, wallets or the environment at risk.”

Key demands

Key elements of U.S. PIRG’s Make VW Pay Campaign include:

1. Volkswagen must offer to buy back all “defeat device” diesel cars with full rebates to customers. VW cheated customers in selling them a product that was different than advertised in material ways.

2. The EPA must demand tough penalties: For VW’s violation, the law calls for penalties up to $37,500 per car — or $18 billion total.

3. Congress must put an end to the auto industry’s “get out of jail free" loophole: Auto industry lobbyists have won and defended a loophole in the law that makes it harder to prosecute their executives for intentionally violating the law and putting the public at risk, U.S. PIRG said. It’s time to close that loophole and any others that threaten consumer safety or wallets.

4. The Department of Justice must stop allowing tax write-offs for wrongdoing.

“GM got off cheap with a $900 million penalty over its ignition switch defect and cover-up that reportedly led to as many as 124 deaths,” concluded Mierzwinski. “Let’s make sure VW pays, that its customers get justice and that corporate crime no longer pays.”

U.S. PIRG is the federation of state Public Interest Research Groups. PIRGs are non-profit, non-partisan public interest advocacy organizations.

Volkswagen has apologized and suspended sales of its "clean diesel" cars in the U.S. after federal and California officials charged the cars were clean only when hooked up to emissions testing devices and dirty the rest of the time.

Whether an apology will be enough to placate outraged VW owners is doubtful. "I am furious at Volkswagon for intentionally lying to me. I want to return my 2010 to Volkswagen for a full refund," said photographer and VW owner Joshua Ets-Hokin in a Facebook comment.

"This is almost unbelievable," said Daryl Allen, a semi-retired engineering graduate of the Masschusetts Institute of Technology, expressing the disbelief with which many VW fans greeted the news.

"Wow, how shady and deceptive from a company that claims to be so environmental!" said another Facebook commenter, J'On Bradley, a heavy equipment operator.

German engineering

Volkswagen, revered by many consumers for turning out precision-engineered high-tech cars at modest prices, has for years promoted its TDI turbodiesels as a clean and efficient alternative to hybrids so the news that the cars allegedly put out 40 times the allowed levels of diesel pollution left many of its most loyal customers dismayed and bitterly disillusioned.

Consumers immediately began complaining that their cars would lose much of their resale value and class-action lawyers were expected to be close behind.

VW itself seemed taken aback by Friday's announcement by the Environmental Protection Agency but finally managed to get out a brief statement attributed to its CEO on Sunday.

It's estimated that about 482,000 of the cars were manufactured and sold -- and are still on the road -- leaving owners of those vehicles waiting for the next shoe to drop.

It is a near certainty that VW will recall the cars to remove the allegedly illegal software that deceives emission inspection stations but whether it will be able to bring the cars into compliance with clean-air regulations without hampering their performance and gas-mileage is not known.

Damage to the brand

Volkswagen faces up to $18 billion in fines and could be criminally prosecuted. But even more severe than any legal penalty may be the damage done to VW's brand.

The dirty diesel scandal is bringing forth a wave of other complaints from VW customers, many of them having to do with excessive oil consumption in gas engines, a complaint VW shares with some other German cars.

A VW owner named Mike contacted us shortly after the diesel story broke, complaining that his gas-powered Tiguan -- Volkswagen's popular small SUV -- is constantly "upshifting" in an apparent effort to improve gas mileage.

"On a level surface at normal acceleration it shifts into 5th gear (1st overdrive) at 27 mph and 6th gear (2nd overdrive) at 32 mph. That means on normal neighborhood driving you are in 6th gear and can make milkshakes most of the way," Mike said.

"I'm far from a mechanic but do know enough to know if you consistently lug an engine you'll rip the bottom out of it before long. Along the way you'll start to burn large amounts of oil before the rings blow," Mike said. "I've got no way to know when I'm going to wind up with a blown engine but I'm certain after speaking to many mechanics about lugging it's just a matter of time."

Slow Sport mode

A ConsumerAffairs staff member who drives a Tiguan said he shifts into the "Sport" mode when driving around town. It makes for a jerky ride and wastes gas but keeps the RPMs up, he said, thus avoiding the "lugging" issue. He tells his wife to do the same, telling her the "S" stands for "Slow."  

Mike's comments are similar to those made a few years ago by Pete, a Fairfax, Va., mechanic who specialized in old Alfa Romeos, which burn oil like a furnace. That's not unusual in cars from the 1970s but Pete said it was completely unacceptable in newer cars and flatly recommended that his customers replace their VWs with Japanese cars. 

Pete's advice may have gone a little far but sadly, the ConsumerAffairs database has many complaints from VW owners complaining of engine failure related to low oil levels.

"At 48,000 engine blew. VW of Springfield said we had not changed oil frequently enough (we changed it more often than required/necessary but I could not find one receipt!)," said Ernie of El Dorado Springs, Mo., speaking of his Volkswagen Toureg.

For those not yet ready to take Pete's advice, it's a good idea to manually check the oil level at least weekly.  

The U.S. Environmental Protection Agency is accusing Volkswagen and Audi of using illegal emissions control software to make their diesel-powered cars appear "clean" when in fact they are emitting up to 40 times the allowable diesel pollution.

The company could be fined up to $18 billion and faces criminal prosecution if it is proven that the deception was deliberate. It is also likely to be ordered to recall the cars.

Volkswagen, which has been far behind the curve in hybrid development, sold the cars with the promise that they are nearly as fuel-efficient and environmentally beneficial as hybrids.

"Hybrids aren’t the only game in town. TDI Clean Diesel engines offer up impressive efficiency numbers too. Take the Passat TDI for starters. It can go up to 814 miles uninterrupted. Now that’s a game changer," VW purrs in a page on its website.

The EPA said the software detects when a car is undergoing emissions testing, turns on the full emission controls, then switches them off when the car returns to "real-world" driving patterns.

“Using a defeat device in cars to evade clean air standards is illegal and a threat to public health,” said Cynthia Giles, Assistant Administrator for the Office of Enforcement and Compliance Assurance. “Working closely with the California Air Resources Board, EPA is committed to making sure that all automakers play by the same rules. EPA will continue to investigate these very serious matters.”

Giles said VW initially denied the allegations but has now admitted wrongdoing.

“We expected better from VW.,We take this very seriously,” she said.

The agency said about 482,000 VW and Audi cars were sold with the illegal software from the 2009-2015 model years. The affected vehicles are diesel versions of:

• 2009-15 model year VW Jetta, Beetle, Golf and Audi A3; and

• 2014-15 model year VW Passat.

What now?

Besides learning that the cars they thought were helping to clean up the air when they may in fact have been making it much dirtier, owners of the cars are now left to wonder what they will have to do to bring the cars into compliance -- something the already-strict California authorities are also pondering. While the cars are likely to be recalled, owners may still face performance and fuel-economy issues after the fixes are made.

“Working with US EPA we are taking this important step to protect public health thanks to the dogged investigations by our laboratory scientists and staff,” said Air Resources Board Executive Officer Richard Corey.

“Our goal now is to ensure that the affected cars are brought into compliance, to dig more deeply into the extent and implications of Volkswagen’s efforts to cheat on clean air rules, and to take appropriate further action,” Corey said.

Oxygen sensor

Earlier this week, Volkswagen was ordered to pay $1.1 million for failing to promptly notify EPA of a defective oxygen sensor affecting at least 329,000 of their 1999, 2000 and 2001 gas-powered Golfs, Jettas, and New Beetles. It was the largest civil penalty to date for this type of violation.

As part of this settlement, Volkswagen completed a voluntary recall of the affected vehicles at a cost of over $26 million. Vehicles with the defect may release thousands of tons of harmful pollutants including nonmethane hydrocarbons (NMHC) and carbon monoxide (CO).

NMHC are key reactants in the production of ozone, a major contributor to cancer-causing smog. CO impairs breathing and is especially harmful to children, people with asthma, and the elderly, EPA said.

"Reliable and effective automobile pollution control systems are an important part of this nation's air pollution reduction strategy," said Thomas V. Skinner, acting assistant administrator of EPA's Office of Enforcement and Compliance Assurance. "This case demonstrates EPA's commitment to ensuring that automobile manufacturers comply with emissions regulations."