Business News

Volkswagen Memos Suggest Emissions Problem Was Known Earlier

By Jack Ewing
Volkswagen emissions problem may have been known earlier

Volkswagen internal memos and emails suggest that company executives pursued a strategy of delay and obfuscation with United States regulators after being confronted in early 2014 with evidence that VW diesel vehicles were emitting far more pollutants than allowed.

The documents, first reported on by the German newspaper Bild am Sonntag and since reviewed by The New York Times, could raise the penalties for Volkswagen based on laws requiring public disclosure of problems with potential to affect a company's stock price. They indicate that top managers knew sooner than they have acknowledged that they could not bring tainted vehicles into compliance with air-quality rules, but led federal and California officials to believe otherwise.

The documents also raise the possibility that Martin Winterkorn, Volkswagen's chief executive at the time, knew of possible emissions cheating by the company sooner than he has said.

According to the documents reviewed by The Times, a confidant of Mr. Winterkorn wrote to him in May 2014, warning that regulators might accuse the carmaker of using a so-called defeat device — software that recognized when the car was being tested for emissions and activated pollution-control equipment. At other times, the cars produced up to 35 times the allowed amount of nitrogen oxide emissions, which are linked to lung ailments and premature deaths.

It was not until last September, more than a year after the letter of warning to Mr. Winterkorn, that Volkswagen admitted publicly that 11 million diesel vehicles, including about 480,000 Volkswagen cars in the United States, were equipped with defeat devices. The number of cars in the United States has since risen to include about 100,000 Audi and Porsche cars with diesel engines.

Toyota recalling 2.9M cars over seatbelt problem

Mr. Winterkorn, who resigned on Sept. 23, has said he did not learn of the defeat device until shortly before the company's public admission. A lawyer for Mr. Winterkorn did not respond to requests for comment. Volkswagen declined to comment on the documents, citing continuing investigations by German prosecutors and internal auditors.

Two people who have held senior positions within Volkswagen in recent years, and who have connections to current and former VW management, confirmed the authenticity of the documents and defended the company's actions, saying the company had not stonewalled United States officials. The people spoke on condition of anonymity.

It remains possible, of course, that other internal documents not available for review paint a fuller picture of the discussions within the company. The roughly half-dozen documents were dated from late April 2014 to early September 2015 and include emails from Volkswagen executives in the United States to company headquarters in Wolfsburg, as well as internal presentations.

More from The New York Times :

A Frequent Flyer's Photos of Air Travel
C. J. a German Shorthaired Pointer, Wins Best in Show at Westminster

The financial and legal stakes for Volkswagen would rise significantly if it is proved that top managers knew of the cheating sooner than they have admitted, and that they misled officials. The company could face higher fines for violating United States environmental laws, as well as larger settlements with Volkswagen owners who have sued in the United States after the value of their cars fell.

In addition, Volkswagen would be more vulnerable to lawsuits by shareholders who accuse the company of violating laws requiring it to disclose information that could affect the stock price. The price of Volkswagen shares has fallen by more than a third since the cheating became known.

What headwinds are hitting the autos industry?

"The question will be, at what moment in time did Volkswagen management know?" said Christopher Rother, a Berlin lawyer who is representing car owners in suits against Volkswagen. If top managers knew earlier than they claim, he said, "the shareholders have a good case."

The United States Department of Justice has previously accused Volkswagen of misleading regulatory officials. The Volkswagen internal documents suggest reasons that the officials in the United States may have believed they were misled.

In a civil suit filed in January in Federal District Court in Detroit, the Justice Department said that attempts by American officials to explain why diesel vehicles emitted more on the road than in lab tests "were impeded and obstructed by material omissions and misleading information provided by VW entities."

The company "knowingly concealed facts that would have revealed the existence" of software designed to make cars perform better in the lab than on the road, the suit said. Volkswagen did not respond to specific accusations, saying in a statement that it would cooperate with authorities.

In May 2014, for example, Bernd Gottweis, a veteran Volkswagen executive who had come out of retirement to help deal with the emissions problem in the United States, wrote Mr. Winterkorn a memo saying the company would not be able to give officials "a sound explanation for the dramatically elevated" nitrogen oxide emissions. United States officials were likely to investigate whether Volkswagen cars were equipped with "a so-called defeat device," the memo said.

Mr. Gottweis was known inside Volkswagen as the Red Adair of quality control, a former Volkswagen executive said, for his ability to deal with emergencies. Red Adair, a Texan, was famous for his ability to extinguish extremely difficult oil-well blazes.

Mr. Gottweis could not be reached for comment.

The two officials who spoke on condition of anonymity disputed that top managers were aware in early 2014 that Volkswagen vehicles were programmed to cheat on emissions tests. One, a former executive who was familiar with the memo to Mr. Winterkorn said that while the memo sounds strongly worded, he believed Mr. Gottweis chose the language simply to get the attention of top management. In other words, the person said, it was not correct to interpret the memo as an indication that Volkswagen executives in 2014 knew that diesel cars had defeat devices.

Klaus Ziehe, a spokesman for the state's attorney in Braunschweig, near Volkswagen headquarters in Wolfsburg, said he could not comment on the documents or speculate what implications there might be for an investigation into possible criminal wrongdoing at Volkswagen. He noted that prosecutors have not identified Mr. Winterkorn as a suspect.

Michael Horn, the chief executive of Volkswagen's United States unit, testified to Congress in October that he was informed in May 2014 that the Environmental Protection Agency might test Volkswagen cars for defeat devices. But he testified that he was told that Volkswagen technical teams "had a specific plan for remedies to bring the vehicles into compliance."

The documents reviewed by The Times indicate that Volkswagen officials already knew that a technical solution was not possible at that time. For example, an internal Volkswagen presentation dated late April 2014 — soon after tests by specialists at West Virginia University raised questions about emissions by VW cars — discussed various strategies the company could use in response. One option was for Volkswagen to offer to update the engine software. But the update would not bring emissions down to the required levels, the presentation said.

Nevertheless, Volkswagen carried out a voluntary recall in December 2014 to update the vehicle software. Subsequent tests by California regulators determined that the update had not fixed the emissions problem.

An activist holds up a sign reading 'Stop Lying' (Schluss mit Luegen) during a protest of environmental watchdog Greenpeace in front of the headquarters of German car maker Volkswagen in Wolfsburg, central Germany, on September 25, 2015.
What you need to know about the Volkswagen scandal

In a statement, the Volkswagen Group of America said, "Michael Horn stands by his testimony, under oath, to Congress, and has no further comment."

Other documents from 2014 and 2015 show Volkswagen managers weighing the risks of different strategies, which ranged from refusing to acknowledge that there was a problem to admitting there was a problem and even buying back diesel cars sold in the United States.

Volkswagen has admitted that the emissions cheating began almost a decade earlier after some people inside the company — a relatively small number, according to VW — realized that a new generation of diesel motors could not meet United States air quality standards legally. The company officially admitted the cheating to regulators, but not to the public, on Sept. 3, 2015, after the E.P.A. threatened to refuse to allow 2016 models to go on sale.

Volkswagen has already faced criticism for not disclosing the emissions problem to shareholders at that time. Some members of the company's supervisory board, which oversees top management, have said they did not learn of the problem until they read about it in the news media on Sept. 18.

Volkswagen has begun recalling diesel cars in Europe. The vehicles will receive a software update and in some cases a new part designed to bring them into compliance with European Union air quality rules. Volkswagen said on Thursday that it had installed new software in 4,300 Amarok diesel pickup trucks, the first wave of vehicles to be recalled.

In the United States, which has more stringent limits on nitrogen oxide emissions, Volkswagen has not yet been able to find a technical solution acceptable to regulators. Among the options Volkswagen is considering is buying back the tainted vehicles.