Unauthorized devices

A New Diesel Headache for Volkswagen

Porsche Accused Of New Diesel Emissions Manipulation
A beautiful disaster. Source: Getty

Nearly two years after Volkswagen was prosecuted by the US government for illegally altering pollution control devices on its diesel cars, a scandal that ended with VW paying $4.1 billion in fines and the firm’s CEO being ousted, the German government Thursday announced that it discovered some diesel cars made by VW subsidiary Porsche had also used illegal software and banned new registrations of the cars.

Volkswagen announced that it was recalling a massive 4 million cars to retrofit new software and Porsche, one of the most expensive luxury brands in the world, said it too was recalling the 3-liter V6 Cayenne sports utility vehicles identified by the German government for a free software upgrade, after Porsche itself had found problems with control systems during its own internal investigation.

“Porsche has detected irregularities in the engine control software during internal investigations and has actively pointed this out to the German Federal Transport Authority,” the company said in a statement to Handelsblatt Global. Porsche, which is part of VW’s Audi group, maintained that the problem was not with the same software that had been at the heart of the US case against VW.

“The software scandal runs the gamut from cheating to consumer deception and criminal behavior. ”

Barbara Hendricks, Environment Minister

But the carmaker’s announcement couldn’t have come at a more awkward time for the company. Just hours earlier the country’s environment minister, Barbara Hendricks, visited VW’s headquarters in Wolfsburg and warned group CEO Matthias Müller that the entire auto industry may face criminal charges in the growing scandal Germans are calling Dieselgate.

Ms. Hendricks said the software scandal runs the gamut “from cheating to consumer deception and criminal behavior.”

She acknowledged that the car industry was important to Germany as it provides tens of thousands of well-paying factory jobs. But she added that everyone can see that the government has been “too close” to the carmakers.

Last weekend, five German carmakers – VW, Daimler, Audi, Porsche, Audi and BMW – were publicly named as being investigated for antitrust behavior for pooling resources and jointly agreeing prices for pollution control devices on diesel cars. The European Union is investigating to see if cartel laws were broken. In addition, several German cities have considered banning diesel cars to meet court-mandated limits on exhaust pollution.

Of the five firms, Volkswagen is the most vulnerable. After the US Environmental Protection Agency prosecuted the company, group CEO Martin Winterkorn was forced to resign and the company was forced to pay a total of $18 billion to settle the charges and refit cars. A group of shareholders is now suing the company in a German regional court claiming that VW failed to disclose the diesel car scandal in a timely manner, causing them to lose money.

On Thursday, the new CEO read only a short statement and refused to answer questions. But Mr. Müller sought to deal with the growing crisis by announcing the firm would retrofit 4 million cars free of charge. The company had already agreed to recall 2.5 million vehicles, so he was expanding that action by an additional 1.5 million cars.

Hours after Ms. Hendricks’ visit ended Transport Minister Alexander Dobrindt announced that an “illegal shutdown device” had been found in the Cayenne diesel cars during an investigation and a compulsory recall had been ordered for 22,000 cars, which must be paid for by Porsche.

Mr. Dobrindt told a news conference he had told VW’s Mr. Müller that the device was part of the pollution control system and because the Cayenne model is still in production, no new cars can be registered until the software is updated and approved by his ministry.

Carmakers are scrambling to avoid fines from the European Union that could reach billions of euros for antitrust activity. It was reported Wednesday that Daimler filed a report with the EU about antitrust behavior in the apparent hope of avoiding a fine.

In a recent antitrust case involving trucks, the companies involved were forced to pay €3 billion in fines.

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Several Handelsblatt reporters and writers contributed to this report. To contact the editor: s.kimball@extern.handelsblatt.com

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