Volkswagen declined to comment, citing the continuing investigation. The company has actually said that top management was not aware of the cheating software, known as a defeat device. Ansgar Rempp, a partner at Jones Day, the law firm heading Volkswagen’s internal inquiry, likewise declined to comment.
What is now clear is that the most recent crisis at Volkswagen traces spine to the PowerPoint presentation a decade ago.
Volkswagen engineers at the company’s research and development complex in Wolfsburg realized that the emissions equipment in their newest diesel engine would certainly wear out too rapidly if it were calibrated to meet American pollution standards. The emissions rules in the United States are much more stringent compared to those in Europe.
A technology expert at Volkswagen offered a solution in the PowerPoint presentation. Simply a few pages long, the 2006 presentation included a graph that explained the process for testing the quantity of pollution spewing from a car. In a laboratory, regulators would certainly attempt to replicate a lot of conditions on the road.
The pattern of those tests, the presentation said, was entirely predictable. And a piece of code embedded in the software that controlled the engine could realize that pattern, activating equipment to reduce emissions Simply for testing purposes.
Elements of the presentation were reported earlier by Süddeutsche Zeitung newspaper and several German broadcasters. Under German privacy law, the executive cannot be named.
The software evolved over the years. It was later upgraded to detect others telltale signs of a regulatory test, enjoy a steering wheel that was not moving, according to Felix Domke, a computer expert and self-described hacker that has actually analyzed the software.
During regulators’ tests, the engine software would certainly turn up the pollution controls. As quickly as it was on the road, equipment made to neutralize harmful nitrogen oxides would certainly turned down, resulting in emissions that were up to 40 times the legal limit.
Volkswagen had a growing awareness of that emissions discrepancy in recent years.
In a court filing, the company lawyers, as section of a defense in a shareholder lawsuit, suggest that the discrepancy was common knowledge within the industry. “The vehicles of all of manufacturers exceed various emissions limits in normal street use,” Volkswagen lawyers said in a court filing, which was obtained by The Times. They further argued that the differences between road emissions and lab emissions were tolerated by regulators.
The management board led by Martin Winterkorn, the chief executive that resigned in September after the admission of cheating, repeatedly rebuffed lower-ranking employees that submitted technical proposals for upgrading the emissions controls, according to the 2 people that attended meetings where the proposals were discussed. The management board rejected the proposals due to cost, the people said.
Lawyers for Mr. Winterkorn did not respond to requests for comment.
More efficient emissions equipment would certainly have actually earned Volkswagen vehicles hundreds of dollars much more expensive, devoid of providing a benefit that customers could perceive. In the United States, even a modestly greater sticker rate would certainly have actually earned it much more difficult for Volkswagen to compete along with rivals enjoy Toyota and Honda.
But cleaner diesel would certainly likewise have actually spared Volkswagen a scandal that has actually already caused sales in the United States to plunge 13 percent from January through March. And repairing diesels in the United States Will certainly cost additional hundreds of millions, otherwise billions, of dollars.
Court documents filed in Germany by lawyers for Volkswagen reveal exactly how the company vastly underestimated the potential penalties.
After American officials began asking questions concerning Volkswagen emissions, company executives, including Mr. Winterkorn, believed they could deal along with the problem quietly at a relatively reduced cost, according to the court documents that were obtained by The Times.
An American law firm hired by Volkswagen to examine regulatory issues, Kirkland & Ellis, told the carmaker in an August 2015 memo that the previous tape penalty was $100 million. The great was imposed on Hyundai-Kia in 2014 for violating the limits on greenhouse gas emissions involving 1.1 million vehicles, or nearly two times as lots of cars as in Volkswagen’s case.
At that level, the penalties could have actually easily been absorbed by Volkswagen, which had sales of 213 billion euros last year, or about $240 billion. However the potential great for Volkswagen is most likely to dwarf the previous record, based on Exactly what the company has actually already set aside.
Court documents filed by Volkswagen indicate that the technicians believed the opportunities of being caught cheating were slim As quickly as the deception began in 2006. While technology to test cars under road conditions was available, it was not widely used by regulators.
“The seemingly small danger of discovery might have actually been a factor in tempting the VW engineers to make the impermissible software alteration,” Volkswagen lawyers said in the court documents.
In recent years, the opportunities of discovery increased. It became much easier to buy emissions testing equipment from suppliers, and lots of environmental teams or independent laboratories did so to reveal that lots of carmakers were understating diesel emissions.
Signs of irregularities in Volkswagen cars were discovered in 2014 by a nonprofit group, the Worldwide Council on Clean Transportation, based on testing performed at West Virginia University. Still, Volkswagen continued to install defeat devices in its cars, including some Audi and Porsche models, until last year.
Volkswagen likewise underplayed the potential threat of the diesel problems, as well as the wrath of American regulators. Mr. Winterkorn and others top managers were used to deferential treatment by government officials in Germany, where it is one of the largest employers.
After the American regulators started looking in to the emissions issue in 2014, the company didn’t provide the problem much weight.
Mr. Winterkorn received a two-page memo in November 2014 that summarized the technical issues along with Volkswagen vehicles in various locations. Plans to recall concerning 500,000 diesel vehicles in the United States due to the emissions issue were granted a single terse paragraph at the bottom of the second page, according to the memo, which was obtained by The Times.
The emissions problem was not corrected along with the recall. And despite the regulators’ growing impatience, Volkswagen did not appear alarmed by the feasible consequences.
During a meeting in July 2015 of high-ranking Volkswagen managers to discuss regulatory troubles about the world, diesel engines in the United States was one item from 6 on the agenda. It was allocated 10 minutes, in a meeting that was set to last 1 hour and 45 minutes, according to a copy of the agenda obtained by The Times.
On Sept. 3, 2015, Volkswagen finally confessed to American regulators that diesel vehicles had a defeat device. Still, executives were shocked at the response.
Stuart Johnson, a Volkswagen executive responsible for relations along with American regulators, said in a memo in January that the Environmental Protection Agency gave your man half an hour’s notice prior to announcing on Sept. 18 that the carmaker had confessed installing defeat devices in diesels.
Although much more compared to a year had passed because the E.P.A. initial raised suspicions concerning Volkswagen diesels, Mr. Johnson said in a Jan. 19 internal memo, which was obtained by The Times, that he believed that Volkswagen still had four months “where we could discuss the issue privately.”
“I was quite disappointed by this turn of events,” Mr. Johnson wrote. He did not reply to a request for comment. A spokeswoman for Volkswagen in the United States declined to comment.