A German newspaper reported that Volkswagen engineers admitted rigging tests for CO2 emissions, fearing that they couldn't meet an ambitious standard set by the automaker's CEO in 2012. 

VW's board is set to meet Monday to discuss cutbacks at the automaker and the widening scandal over deviations from regulatory standards that first came to late in late September. The U.S. Environmental Protection Agency charged VW (VLKAY) with installing a computer program that falsified nitrogen oxide emissions levels on half a million diesel cars sold by Audi and VW. 

Separately, VW is preparing to send owners of affected diesel cars in the U.S. $500 coupons redeemable for cash at dealerships and elsewhere in an effort to bolster sagging goodwill. 

The latest CO2 testing irregularity, according to Bild am Sonntag, covers about 800,000 cars and was discovered by internal VW investigators. The newspaper said engineers told investigators that they had tampered with tire pressure and mixed diesel fuel in gasoline to reduce consumption. Measuring CO2 emission is used in Europe as a proxy for measuring fuel consumption. 

"Employees have indicated in an internal investigation that there were irregularities in ascertaining fuel consumption data. How this happened is subject to ongoing proceedings," a Volkswagen spokesman told Reuters, declining to comment on the newspaper's report. 

Martin Winterkorn, VW's CEO in 2012, resigned in September following the EPA's accusations. Winterkorn was replaced by Matthias Mueller, formerly the head of Porsche. Additionally, VW has added a former justice of Germany's supreme court to its management board to oversee compliance and ethics. 

"This is a painful process, but it is our only alternative. For us, the only thing that counts is the truth. That is the basis for the fundamental realignment that Volkswagen needs," Mueller said in a statement. 

The German newspaper cited a declaration by Winterkorn at the Geneva Auto Show in March 2012 that VW intended to reduce CO2 emissions in its vehicles by 30% by 2015. The newspaper said engineers were fearful about telling him they were facing obstacles to achieving the goal. 

The German automaker has lost about a third of its market value so far this year in what has become the biggest corporate scandal in the country's recent memory. VW set aside $7.3 billion to cover repair and recall costs to cover about 11 million diesel vehicles worldwide. The newspaper estimated that the latest problem with CO2 could cost it another $2.2 billion. 

Monday's meeting of the supervisory board is meant to gauge the extent of damage to the company, according to several sources, and to begin the process of remedial action. The company's problems have created a political crisis for the government of Angela Merkel, which is under pressure from the environmental movement to get to the bottom of the crisis and fix it.











Doron Levin is host of "In the Driver Seat" broadcast on SiriusXM Insight 121 on Saturday at noon, encore Sunday at 9 a.m.

The writer has no financial interest in the aforementioned companies.