VW emissions scandal: VW Group to fix or buy back 500,000 affected cars in the US

22 Apr, 2016 9:26am Martin Saarinen

The current state of play in the Volkswagen diesel emissions scandal: compensation, recalls and sales figures

Owners of the 500,000 cars in the US affected by the VW emissions scandal will be offered 'substantial compensation', and the option to sell their vehicle back to VW, after the VW Group struck a preliminary deal with US authorities over the dieselgate emissions test violations. 

Owners of affected vehicles will be given the choice of either selling their car back to VW, or having the company fix the vehicle so that it meets the US emissions standards without the cheat software that was built in. Any owner with a lease deal on thei car will be allowed to cancel the finance agreement but no technical details of what the fix will involve have been released. 

The agreement the Volkswagen Group has struck with US authorities covers the 482,000 vehicles with a 2.0-litre diesel engine found to contain the emissions test defeat device. The 90,000 VW Group vehicles with 3.0-litre six-cylinder diesel, which were also found to violate US emissions laws, albeit without the same defeat device on board are not covered by the deal. 

The terms of the agreement also stipulate that the VW Group is to pay 'substantial compensation' to affected owners. No word on specific dollar sums has been agreed, but the Group announced it has set aside €16.2billion (£12.6billion) to cover the cost of the emissions crisis. Last year VW estimated the scandal would cost the company £4.7billion in renumeration. 

Although the deal provides much needed closure to US owners, they will have to wait longer to know more. The US courts have given VW until June 26th before the terms and conditions of the deal will be publically released. 

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In Europe, a fix for the dieselgate affected cars has already been approved and recalls are underway. UK and European owners have not received any compensation and are unlikely to, according to previous statements from the Group. The reasoning being that the fix to VW's cars will have no impact on performance or economy. In the US, the cars need the fix in order to legally pass the more stringent emissions standards applied to all new cars.  

In a statement the VW Group said: "In connection with the diesel issue, Volkswagen AG confirms that an agreement in principle with the Department of Justice (Environmental Division), the Environment Protection Agency (EPA), and the California Air Resources Board (CARB), with the full involvement of the Federal Trade Commission (FTC), has been reached in the United States." Adding that: "The arrangements in the making in the United States will have no legal bearing on proceedings outside of the United States." 

VW sales up in 2016

The Volkswagen Group announced its global sales figures for the first quarter of 2016, revealing that it delivered over 2.5million vehicles from January to March. That represents a 0.8 per cent rise over the same period last year. This growth comes despite a major stroke of bad publicity at the end of 2015 surrounding the Group's emissions-cheating software engine systems.

In Europe the group saw a 3.3 per cent rise in sales over the three-month period, with a 1.5 per cent rise in Germany alone. The market witht he most growth was China, which saw a rise in sales of 6.4 per cent. South America dropped 27.6 per cent however, and Russia fell 16.3 per cent as well. In North America sales fell 2.1 per cent and in the USA, where the scandal hit hardest, fell 5.7 per cent.

Although the VW Group as a whole saw growth, the VW passenger cars brand saw a global drop in sales by 1.3 per cent. It was the only brand to fall however, with Audi, Skoda, SEAT, Porsche and commercial vehicle brands all seeing sales growth over the period.

VW bosses knew of cheating in 2014

Volkswagen has admitted its bosses knew the company was cheating in emissions tests more than a year before the scandal first broke out.

The company has confirmed former CEO Martin Winterkorn was told on 23 May 2014 that the company might face an emissions probe from US authorities. VW, however, argues that Winterkorn may not have actually seen the memorandum containing this information, as it was part of his ‘extensive’ weekend reading. Winterkorn previously denied any knowledge or wrongdoing on his part.

VW said: “On 23 May 2014, a memo about the ICCT study was prepared for Martin Winterkorn, then-Chairman of the Management Board of Volkswagen AG. This memo was included in his extensive weekend mail. Whether and to which extent Mr. Winterkorn took notice of this memo at that time is not documented.” 

Volkswagen says the diesel matter was treated as a product issue affecting the company, and did not receive any initial special attention from senior management. 

The news of Winterkorn’s possible knowledge of the 'defeat device' software came just weeks after it was discovered that the existence of the software was an open secret within Volkswagen’s engine development department.

In fact, according to reports from the German media, Audi developed the defeat device as early as 1999, but the it remained unused until 2005 when VW's engineers needed a way to get around the strict US emissions regulations. 

Volkswagen is still investigating the build up and aftermath of the emissions scandal with law firm Jones Day. The carmaker was scheduled to reveal more details of the investigation later this April, but has since cancelled the press conferences. VW has yet to announce new dates.  

No emissions scandal compensation for UK car owners

Volkswagen customers in the UK with cars affected by the emissions scandal will not receive compensation, as previously thought.

In December, CEO Matthias Mueller said at a press conference broadcast globally: “We’re working on an effective package for all our customers. There will be an attractive package, let’s call it compensation, for the reduction in value of cars.”

However, it has now been confirmed that UK owners will not be compensated. A spokesman told Auto Express: “There won’t be compensation. All the indications are that residual values are unaffected.” And he claimed that the confusion had been caused by “a slight mistranslation”.

Speaking before the Environment, Food and Rural Affairs Committee, Paul Willis, Managing Director of Volkswagen Group UK, said: “To pay compensation there has to be a loss, and at this stage I see no reason for there to be a loss. Our engineers tell us there will be no difference in fuel consumption or driveability.

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“So the only other area is on the question of residual values. I, at the moment, have seen no clear evidence of adverse impact on residual values. So when I say that there is no loss, then there is also no need for compensation.”

Although residual values are still said to remain stable - the latest new car registrations figures show UK consumers are starting to look elsewhere for new cars. Volkswagen's January sales were down 14 per cent to last year. 

Willis, did however, add that in certain cases, a “support package” may be made available to customers in the form of a goodwill gesture – for example if an owner living in a remote area faces a lengthy journey to get the necessary remedial work done on their car.

Yet VW may not be off the hook completely. The UK Government has stated that if evidence of consumers suffering from falling residual values or vehicle performance emerges, VW would be liable to compensate owners. 

Transport spokesman Viscount Younger of Leckie said: "The Competition and Markets Authority has not opened a formal investigation but is continuing to assess whether there is evidence of consumer harm." 

As reported previously, US owners will receive $1,000 gift cards by way of compensation, but a spokesman said they faced a “different set of circumstances”. In the UK, VW has introduced ‘loyalty bonus’ discounts to existing owners or their family members registered at the same address who buy a new VW. The discounts range from £400 to £1,500 off selected vehicles. 

The chairman of the Volkswagen supervisory board, Hans Dieter Pötsch, has also confirmed that VW Group will introduce real world emissions figures backed by independent testing authorities for their vehicles in the future, and will place greater scrutiny on its software development.

How the emissions scandal evolved

The ‘dieselgate’ emissions scandal dates back to September 2015 when the US Environmental Protection Agency (EPA) found that the VW Group had built diesel cars with ‘defeat device’ software designed specifically to cheat emissions tests. 

However, the scandal finds its origins in 1999 when Audi engineers, according to reports in the German media, created a defeat device to bypass emissions tests. The device, however wasn't used until 2005 when VW decided to launch an aggressive diesel campaign into the US and had to use the device to pass the emissions tests. Under the stricter standards in the US at the time, only 31mg/km of nitrogen oxides were allowed to be emitted, six fold less than the European standards at the time (Euro 5).

To meet budget and an approaching deadline, a group of engineers in the powertrain development division began to modify the engine management software, so the cars would meet the emissions criteria. A total of 15,000 individual algorithms were changed by the VW employees. 

Around 11 million diesel cars with EA 189 1.2, 1.6 and 2.0-litre pre-Euro 6 diesel engines have been identified by Volkswagen as containing the ‘defeat device’ software. In the UK, over 1.1 million cars were sold with the malevolent software on board. The Group issued a worldwide recall to fix all affected VW, SEAT, Skoda and Audi vehicles.  

Shortly afterwards, the VW Group also announced that an internal investigation had revealed that official CO2 and fuel economy figures for 800,000 of its vehicles contained irregularities. This was the first time VW admitted its Euro 6 compliant engines have been manipulated, and also widened the issue from diesel engines only to include petrol cars too.  

The storm surrounding VW has reached the upper echelons of the corporate hierarchy with a shuffle in managerial positions, culminating in the former-CEO Martin Winterkorn resigning and being replaced by ex-Porsche boss Matthias Muller.  

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The new management board has taken up defensive positions by raising the amount of money set aside to cover the damages from £4.7billion to £12.6billion. However, no definitive verdict on the costs of the entire scandal has been made. 

Although other car companies were all quick to state no such culture exists within their factories, news of Renault recalling 15,000 vehicles after the French government found their emissions above acceptable limits has added to the public scepticism. 

VW recalls from March 2016 onwards

Volkswagen and the German Motor Industry Federation (KBA) have come up with technical solutions to the VW emissions scandal. 2.0-litre diesels will receive a software tweak, while vehicles with a 1.6-litre diesel will need to be fitted with a ‘flow transformer’ device to help the engine’s computer calculate the right amount of fuel and air being combusted. 

This means around 400,000 UK cars will require mechanical changes - but VW says they should take less than an hour to make at dealerships. The software update for 2.0 engines will take around half an hour. A fix for the 1.2-litre unit is still under consideration.

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VW confirmed the fix will not affect the performance or fuel economy of the cars, while Mueller also said the cars will pass the European emissions test (without cheating) after the fix has been installed. 

The changes made as a result of the recall will have "negligible effect" on customer cars in terms of performance or fuel economy, with Mueller explaining that owners "won't be able to feel it."

Volkswagen has published the following timeline for UK recalls.. 

Engine Approval by KBA Intended start of Fix roll out
EA 189 2.0-litre Jan/Feb 2016 1/3/2016
EA 189 1.2-litre April/May 2016 1/6/2016
EA 189 1.6-litre July/Aug/Sept 2016 1/10/2016

Though UK vehicles get by with software tweaks, vehicles in US and will need many more physical changes to the catalytic converters and the Selective Catalytic Reduction (SCR) AdBlue urea injection systems to pass the strict North American emissions criteria. This is going to take longer, and the Group announced it still does not have a confirmed timeline for North American owners. 

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Scroll down for everything you need to know about the VW emissions scandal...

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Check if your VW Group car is subject to the recall

The VW Group has said that the following quantities of UK vehicles are set for a recall... 

  • • VW passenger cars - 508,276
  • • Audi - 393,450
  • • SEAT - 76,773
  • • Skoda - 131,569
  • • VW commercial vehicles - 79,838

Total VW Group cars set for UK recall: 1,189,906

The websites below let owners of VW Group cars check whether or not their models are fitted with the EA 189 engine and subject to the recall. All you need is your car's VIN number which should be located at the bottom corner of the windscreen on the driver's side or in the car's service book. 

VW emissions scandal timeline: how 'dieselgate' happened

Click through to page two for the answers to your key questions regarding the VW emissions scandal...