Volkswagen Says Its Software Fix Can Legalize Audi Engines in U.S.
Bloomberg News
The U.S. Environmental Protection Agency is allowing Volkswagen (VLKAY) to submit a revised version of its software to correct emissions irregularities on 3.0-liter diesel engines used in Audi luxury vehicles.
Audi vehicles with the large diesel engine number about 85,000 in the U.S. Once they are repaired, the fix should cost VW some $53 million. How many consumers will decide to revise software on their cars remains unclear.
News of the development came Monday in an address by Matthias Mueller, VW's CEO, to about a thousand company executives in Wolfsburg, Germany. Mueller also said that it would take "months" to get to the bottom of who was responsible for faked emissions tests, calling the process "manageable."
VW's stock has rallied in the past month, its shares rising 4.6% following a massive loss of about a third of their value following the EPA announcement.
However, Mueller didn't comment on the effect the software will have on the engine's performance, other than to reconcile its compliance with U.S. air quality regulations. A "cheat" provision of the vehicle's software allowed the engine to pass certification testing with an acceptable level of nitrogen oxide emissions, which reverted to higher, unacceptable levels during normal operation, prompting an EPA sanction on Sept. 18.
A significant unanswered question is whether consumers will bring their cars voluntarily to Audi dealers so their vehicles can undergo software revision, which likely will worsen their performance, in terms of power and fuel efficiency.
Earlier this month, VW offered owners of its affected diesel engines $1,000 in coupons and vouchers as what the automaker called "a goodwill gesture." To redeem the vouchers, customers must go to a VW dealer. Michael Horn, president of the automaker's U.S. subsidiary, said 120,000 owners already had taken advantage of the offer.
If some VW and Audi owners do business with private garages rather than dealerships it's possible they will be difficult to contact. Some may seek contact with dealerships in order to correct the emissions irregularity, motivated by the knowledge that nitrogen oxide emissions are a factor in lung ailments and the creation of smog.
So far, regulators haven't discussed publicly what measures they might take to locate diesel engines that have been improperly certified and weren't fixed so that they comply. Vehicle recalls often attract only a proportion of those owners that are eligible for repair or replacement free of charge. Average rate of completion of required repairs in the industry is about 70%.
The role of regulators and how they might become involved in the VW scandal took a new turn in Germany this week. Prosecutors said they are probing the possibility of tax evasion by VW and its employees under the theory that improper test measurement of CO2, a proxy for fuel consumption, led to smaller tax payments than were required on the engines.
Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.