By Sara Randazzo, Aruna Viswanatha and William Boston
Most of Volkswagen AG's diesel-powered vehicles on U.S. roads
can't be retrofitted to fully comply with air-pollution
regulations, though its larger vehicles likely can, an attorney for
the company said on Thursday.
Robert Giuffra also told a U.S. court that Volkswagen is close
to offering regulators a fix for the larger vehicles, which he said
have better emissions controls than the about 475,000 2-liter
vehicles covered by a $15 billion settlement reached in June.
"We weren't able to fix the 2-liter cars to the standards to
which they were originally certified," Mr. Giuffra told a San
Francisco judge.
Separately, the company said it reached the broad outlines of a
deal with about 650 U.S. Volkswagen dealers to compensate them on
similar terms as consumers for losses due to the emissions law
violations.
Under the June deal with regulators and consumers, drivers of
2-liter vehicles such as Jettas, Passats and other cars dating to
the 2009 model year will receive compensation and have a choice
between selling back their cars or accepting a repair. Larger
vehicles with 3-liter engines, which include sport-utility
vehicles, Porsche and Audi models, weren't part of the earlier
offer. Volkswagen likely will conduct a recall on those vehicles,
which could increase its costs.
In the proposed agreement for the smaller cars, regulators at
the U.S. Environmental Protection Agency and California Air
Resources Board accepted that the vehicles -- which emit up to 40
times the legal limit of nitrogen oxides -- won't meet the
standards to which they were originally certified. CARB estimates
that a fix will lower excess emissions by between 80% and 90%, but
won't completely bring the vehicles into compliance.
Nearly a year ago Volkswagen acknowledged it installed devices
in some 11 million diesel-powered vehicles world-wide that enabled
the cars to cheat emissions tests. Since then, Volkswagen has faced
legal challenges around the globe, and is moving to reach
agreements with regulators and drivers.
The proposed dealer agreement would include a payout and the
ability to sell some used cars to Volkswagen at the same price
being offered to U.S. consumers. Dealers haven't been able to
resell the used diesel cars they take in trade. The offer should
help "heal the wounds between the dealers and Volkswagen," Steve
Berman, an attorney for the dealers told U.S. District Judge
Charles Breyer. Judge Breyer set a Sept. 30 deadline to present the
deal for court approval.
Hinrich Woebcken, head of Volkswagen's North American business,
called the agreement "a very important step in our commitment to
making things right" in the U.S. "Our dealers are our partners and
we value their ongoing loyalty and passion for the Volkswagen
brand." Matthew Welch, general manager of a Volkswagen dealership
near Seattle, welcomed the pledge of compensation for its
authorized sellers. "[VW has] kept all their promises to us," he
said.
Mr. Giuffra said for some 3-liter vehicles, the fix could be as
simple as a half-hour software update. Others, especially earlier
models, will involve upgrades to catalytic converters, sensors, and
other steps. "We are literally talking about 2 million lines of
code," Mr. Giuffra told the court.
Judge Breyer gave Volkswagen until Oct. 24 to submit to
regulators a proposal on a subset of the 3-liter vehicles.
Plaintiffs' lawyers are pushing for a trial date and want to
discuss other settlement options for drivers of the 3-liter
vehicles, something Judge Breyer instructed the parties to begin as
a contingency plan.
So far, regulators haven't approved fixes for the 2-liter
vehicles but have conceded that even if the diesel vehicles aren't
100% compliant with U.S. standards, they'll let them stay on the
roads.
That concession comes at a price for Volkswagen: As part of its
proposed settlement, it must pay $2.7 billion into an environmental
remediation fund and $2 billion to promote so-called zero-emission
vehicles. CARB and the Justice Department have said they expect the
results of those programs to offset any additional polluting done
by the diesel vehicles.
Volkswagen has said it would propose fixes for the three
generations of 2-liter vehicles to regulators at periodic intervals
over the next several months.
At the same time, Volkswagen is preparing for the possibility of
hundreds of thousands of vehicles returning to dealerships once the
2-liter settlement receives the court's final blessing, which could
come as soon as Oct. 18.
Volkswagen received permission from Judge Breyer earlier this
month to run a pilot program on 2-liter models to find an
environmentally friendly way to scrap the vehicles and salvage
their parts. Volkswagen is allowed to resell any returned vehicles
in the U.S. or abroad if they undergo a government-approved
modification. Experts in the $32 billion automotive recycling
industry say used vehicles can sometimes be worth more when sold
for parts than whole.
As it makes peace with consumers, Volkswagen is still in talks
with the U.S. government over criminal and civil penalties. The
company also said this week it is in settlement talks with
Maryland, Massachusetts, New York, Pennsylvania and Washington over
alleged violations of state environmental laws.
Jonathan Bach contributed to this article.
Write to Sara Randazzo at sara.randazzo@wsj.com, Aruna
Viswanatha at Aruna.Viswanatha@wsj.com and William Boston at
william.boston@wsj.com
(END) Dow Jones Newswires
August 26, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.