Volkswagen AG's (VOWG_p.DE)
U.S. chief executive blamed "individuals" for using software to cheat
on diesel emissions at a House hearing on Thursday as lawmakers attacked
federal environmental regulators for failing to catch the fraud for
years.
Michael
Horn, head of Volkswagen Americas, testified before a House of
Representatives oversight and investigations panel about the emissions
scandal that has chopped more than a third of the company's market value
and sent tremors through the global auto industry.
Volkswagen's
use of defeat devices, software that evaded U.S. tests for emissions
harmful to human health, was not a corporate decision, but something a
few employees engineered, Horn said under oath.
"This
was a couple of software engineers who put this in for whatever
reason," Horn said about the software code inserted into diesel cars
since 2009. Volkswagen used different defeat devices in Europe and the
United States, Horn said, as emissions standards are different in the
two regions.
"Some people have made
the wrong decisions in order to get away with something," Horn said
when asked by lawmakers if Volkswagen cheated with defeat devices
because it was cheaper than using special injection systems to cut
emissions.
Lawmakers slammed an
Environmental Protection Agency official who testified after Horn for
not catching Volkswagen. Representative Michael Burgess, a Texas
Republican, questioned the size of EPA's annual budget, noting that the
cheating was uncovered by a West Virginia University study that had a
budget of less than $70,000.
"I'm
not going to blame our budget for the fact that we missed this
cheating," replied the EPA's Christopher Grundler, who said his
transportation and air quality office has an annual budget of roughly
$100 million. "I do think we do a very good job of setting priorities."
Burgess
replied: "With all due respect, just looking at the situation, I think
the American people ought to ask that we fire you and hire West Virginia
University to do our work."
Volkswagen
is expected next week to provide U.S. and California regulators with a
preliminary attempt at a software fix for the defeat devices it
installed in 2012-2014 Passats, the U.S. Environmental Protection Agency
said on Thursday.
SUED IN TEXAS, RAIDED IN GERMANY
The German
automaker has suspended 10 senior managers, including three top
engineers, as part of its internal investigation. The scandal, the
biggest business crisis in Volkswagen's 78-year history, has also forced
the ouster of long-time CEO Martin Winterkorn.
German
prosecutors raided Volkswagen's headquarters and other offices earlier
on Thursday, as part of their investigation into whether the company
also cheated tests in Europe.
Volkswagen said it was supporting the investigation and had handed over a "comprehensive" range of documents.
The
internal inquiry has found employees began to install defeat devices
after realizing a costly new engine would fail U.S. emissions standards,
according to sources. Company investigators have found no evidence
against the engineers.
Also on
Thursday, the state of Texas sued Volkswagen over the marketing of
supposedly clean diesel vehicles, alleging the company violated a state
law prohibiting deceptive trade practices.
Representative
Chris Collins, a Republican from New York, said at the House hearing he
categorically rejected Horn's statement that using defeat devices was
not a corporate decision.
"Either your entire organization is
incompetent when it comes to trying to come up with intellectual
property, and I don't believe that for a second, or they are complicit
at the highest levels in a massive cover-up that continues today,"
Collins said.
Volkswagen, even
after hearing in the spring of 2014 about an independent study that
showed emissions irregularities in two of its diesel cars, told U.S. air
regulators for about a year that the higher emissions data was the
result of technical problems with the tests.
Horn
said the company told regulators only on Sept. 3 that it was using
defeat devices and that before then he had no understanding of what they
were.
Horn, sitting alone
before the committee with folded hands and a furrowed brow, apologized
to lawmakers for Volkswagen's using defeat devices, and pledged to
cooperate with the committee. But he offered little new, saying the
company's external investigation remains at a preliminary stage.
THE FIX
Owners
of 2009 to 2015 Volkswagen diesel cars have more questions than answers
about their vehicles and many have joined lawsuits against the company.
Horn said fixing the vehicles will take years and require approval from
regulators. A small number of cars are expected to need only a software
fix.
Most of the cars would
require more extensive changes including possible installation of urea
tanks that neutralize harmful emissions and particulates.
Volkswagen
is working to obtain conditional approval from EPA and California
regulators to begin software fixes in January on some of the 482,000
cars that had defeat devices. Another group of the cars will require
fixes that would begin no earlier than mid-2016. But there was no date
for fixing the 325,000 oldest "Generation One" cars that need the most
repair.
The EPA's Grundler told lawmakers he expects Volkswagen to provide options for fixing the cars as early as next week.
Representative
Frank Pallone, a New Jersey Democrat, said Horn's statements did not
give him "much confidence that we're going to see these vehicles get
fixed."
Pallone pressed EPA air
enforcement director Phillip Brooks on whether individuals at Volkswagen
or the company itself could face criminal charges. "It would be unfair
for me to say much more about what the end result might be," Brooks
said.
"But it’s a possibility?” Pallone asked.
“Certainly,” Brooks answered.
(Additional reporting by Andreas Cremer in Berlin, Barbara Lewis in Brussels and David Ingram in New York; Editing by Matthew Lewis)
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