- Carmaker's profits to be considered by U.S. when fines imposed
- VW's U.S. chief testifies about timeline on emissions cheating
Volkswagen AG’s top U.S. executive apologized and promised a full investigation into its emissions-cheating scandal as U.S. lawmakers examining the case opened a hearing demanding answers both from the automaker and federal regulators.
“Volkswagen has betrayed a nation -- a nation of regulators, loyalists and innocent customers. It’s time to clean it up or get off the road” said Representative Fred Upton, a Michigan Republican, as a hearing of the House Energy and Commerce investigations subcommittee began Thursday. “VW will inevitably pay a steep price for its dirty little secret. How it responds to this failure will go a long way to rebuilding or further eroding the public’s trust.”
It is the first public questioning in the U.S. of a VW executive since the U.S. Environmental Protection Agency and the California Air Resources Board announced their investigation Sept. 18. The scandal has rocked the world’s second-largest automaker, leading to the resignation of its chief executive, Martin Winterkorn, and an announced charge of 6.5 billion euros ($7.3 billion) for recall repair costs. Under the Clean Air Act, Volkswagen may be liable for fines as high as $18 billion, based on maximum penalties per car involved.
“We are determined to make things right,” Michael Horn, the president and chief executive officer of Volkswagen of America, told the committee. “This includes accepting the consequences of our acts, providing a remedy, and beginning to restore the trust of our customers, dealerships, employees, the regulators, and the American public.”
Representative Marsha Blackburn, a Tennessee Republican, wonders whether EPA officials are so overburdened by enforcing environmental regulations that they’re beginning to miss really important things.
“Being oblivious is a pretty big deal,” Blackburn said in an interview.
Just how much money Volkswagen made by cheating on U.S. emissions tests will be a factor in the penalties that will be assessed, EPA officials said. The agency intends “to assess the economic benefit to VW of noncompliance and pursue appropriate penalties,” Christopher Grundler, director of EPA’s Office of Air and Radiation, and Phillip Brooks, director of civil enforcement for air, said in their written testimony.
“Remedies should match the wrongdoing,” said Erik Gordon, a professor with the Ross School of Business at the University of Michigan. When U.S. regulators lacked statutory authority to impose higher fines on carmakers, including General Motors Co. over flawed ignition switches, “the small fines frustrated the public and Congress,” he said.
The Wolfsburg, Germany-based automaker will ultimately face costs and lost revenue from its damaged image of more than 35 billion euros ($39 billion), according to an estimate by Warburg Research.
"The behavior to which VW admitted represents a fundamental violation of the public trust," said Representative Tim Murphy, the subcommittee chairman, a Pennsylvania Republican. "The reverberations of this violation can be seen across the United States and across the world as people grapple with the implications."
Volkswagen has withdrawn applications with the EPA for certification of its vehicles for the 2016 model year, Horn said in his submission for the House hearing. Horn learned in early 2014 that the carmaker might not be following emissions regulations on its diesel models, and the topic came up again later that year, when he was told VW’s technical teams had a plan for fixing the cars involved, he said.
The company’s initial disclosure to the California Air Resources Board that it had a “second calibration” governing engines during emissions tests on three different diesel engines occurred on July 8, according to the committee. It wasn’t until Sept. 3 that the company came clean with the EPA and CARB that this alternative mode was a “defeat device,” shutting down pollution-control equipment as the cars drove in the real world.
Responsible parties will be identified and held accountable, and Volkswagen will revive its reputation, Horn said. Technical teams are still working to identify solutions for consumers, he said. Company officials in Germany said Wednesday there will be multiple solutions for different engines and different countries, and that the work would continue at least through the end of 2016. German Transport Minister Alexander Dobrindt said in a video posted on his ministry’s website that across the European Union, Volkswagen will need to exchange or rebuild parts for about 3.6 million engines.
U.S. lawmakers have been hearing from consumers, whose resale values have plummeted, as well as car dealers, who are paying interest to hold vehicles they can’t sell, said Representative Michael Burgess, a Texas Republican who sits on the Oversight and Investigations Subcommittee.
“The rules are set, and they’re set for a reason,” Burgess said. “If you have an outlier in the marketplace, it’s harmful at a lot of different levels.”