Having now involved around “450 external and internal experts involved in the investigations” into emissions test rigging, Volkswagen on Thursday (10 December) admitted pressure to launch ‘clean diesel’ models in the US led to it deliberately designing engines to meet NOx emissions on test while knowing that real-world driving would greatly increase tailpipe pollution. It added it was making good progress with its investigation, vehicle modifications and group restructuring, including management changes.
VW said it had concluded the nitrogen oxide emissions were due to “a chain of errors that were allowed to happen” rather than a single cause, spurred by the decision to launch the ‘clean diesel’ model lines in the United States in 2005 and it confirmed what many industry observers have already suggested.
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“Initially, it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the US within the required timeframe and budget. This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested. Later, when an effective technical process was available to reduce NOx emissions, it was not employed to the full extent possible. On the contrary, the software in question allowed the exhaust gas treatment additive ‘AdBlue’ to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay, but significantly higher when vehicles were on the road,” the automaker said.
A packed press conference in Wolfsburg heard modifications for vehicles in Europe have been developed, and approved by authorities with recalls starting next January. A management restructure “is proceeding according to plan, and the process of developing a new strategy has commenced”.
Management board chairman Matthias Müller said: “We are doing everything to overcome the current situation, but we will not allow the crisis to paralyse us. On the contrary, we will use it as a catalyst to make the changes Volkswagen needs.”
Initial scrutiny has focused on irrelevant processes, reporting and monitoring systems, and associated infrastructure and findings will be reported to law firm Jones Day.
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By GlobalDataVW announced earlier it was satisfied CO2 emissions were largely as claimed and is now eyeing the software-influenced excess NOx emissions which, VW said, were largely due to “misconduct and shortcomings of individual employees, weaknesses in some processes and, crucially, “a mindset in some areas of the company that tolerated breaches of rules”.
Test and certification processes affecting engine control devices were not suited to preventing use of the software slected. VW said software for engine control devices now “will be developed more strictly in accordance with the ‘four-eyes’ principle and other aspects of software development are being reorganised. Deficiencies were also found in reporting and monitoring systems.
“The main problem there was that responsibilities were not sufficiently clear. Volkswagen will now further sharpen them,” the automaker said, adding that IT “deficiencies” would be addressed.
Supervisory board chairman Hans Dieter Pötsch said: “[A group audit] investigation is producing valuable findings which will help us create a structure that, rather than favouring breaches of regulations, will prevent them, or at least allow them to be detected early on.”
A key conclusion: VW’s testing practice “must undergo comprehensive changes” and future emissions testing will be evaluated both externally and independently.
More time for external investigation
VW said Jones Day would need “well into next year” to finish its probe because there was a huge amount of electronic data to probe and legal responsibility must be considered and any case made for prosecution must also hold up in court. An update will follow at the VW annual general meeting on 21 April, 2016.
Pötsch added: “No business transaction justifies overstepping legal and ethical bounds.”
As a first step, nine managers who may have been involved in the manipulations were suspended.
Pötsch said: “I here and now guarantee that we will pursue our thorough investigation to its conclusion. I vouch for this personally, as does the entire supervisory board of Volkswagen AG.”
Planning is proceeding to recall and modify European vehicles, as announced last month, and VW said today “the costs of implementing these solutions will be manageable in technical, manufacturing, and financial terms”. The software of the two- and 1.2-litre TDI will be updated while the 1.6 TDI, as previosuly stated, will get a ‘flow transformer’ and a software update.
The 2.0 TDI recall begins in January, the 1.2 in the second quarter and the 1.6s in the third quarter “to allow time to prepare for the hardware modification” with all modifications scheduled to be done by the end of next year, also as previously announced.
Müller said: “Volkswagen will not rest until this matter has been resolved once and for all to our customers’ satisfaction.”
However, VW has now acknowledged a fix in the US may be more difficult: “Due to far stricter nitrogen oxide limits in the United States, it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy. To this end, VW is cooperating closely with the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB). The solution designed for North America will be presented as soon as it has been approved by the responsible authorities.”
Group restructure
Volkswagen said today the company would be “managed in a more decentralised fashion in the future, and its brands and regions will be granted more independence”. Changes are being made to streamline decision-making and make the company leaner while reducing costs. “All these structural changes ultimately aim to reduce managerial complexity,” the automaker said.
Headed by recently appointed Christine Hohmann-Dennhardt (poached from Daimler with the rival automaker’s assistance), VW’s integrity and law unit now will be represented as an independent department on the management board. More importance will also be given to “digitalisation” which will report directly to the board chairman. Direct reports will be reduced from more than 30 to 19.
Management will be reshuffled, too. Since the beginning of 2015, six new executives have joined the management board, seven of brands have had their top personnel changed, and eight departments falling within the CEO’s area of responsibility now have new heads and more’s to come.
Müller said: “The team with which we wish to address the challenges of the coming months and years is in place.” Details of the new structure will be set out in the first quarter of 2016 and in place group-wide by the start of 2017.
He said VW’s the future “will be about more open discussions, closer cooperation, and a willingness to allow mistakes if they are understood as an opportunity to learn”.
“We don’t need yes-men, but managers and engineers who make good arguments in support of their convictions and projects, who think and act like entrepreneurs. I am calling for people who are curious, independent, and pioneering. People who follow their instincts and are not merely guided by the possible consequences of impending failure. In short: the future at Volkswagen belongs to the bold. We need a little more Silicon Valley, coupled with the competence from Wolfsburg, Ingolstadt, Stuttgart, and the other group locations.”
The automaker has started developing a new target: “Strategy 2025”, scheduled to be presented in mid 2016.
Müller said the operating business was “meeting expectations” while the 2015 annual forecast, updated at the end of October, remained unchanged though the automaker admitted sales figures were “very mixed as regards the various markets and brands”.
Müller: “Overall, the situation is not dramatic, but, as was to be expected, it’s tense.”
