GERMANY FORCES VW’S HAND
8.5 million vehicles being recalled
BERLIN Volkswagen AG will embark on one of the biggest recalls in European automotive history, affecting 8.5 million diesel vehicles, after German authorities threw out the carmaker’s proposal for voluntary repairs.
The Federal Motor Transport Authority, or KBA, demanded a recall of 2.4 million cars in Germany after reviewing proposals Volkswagen filed last week to fix vehicles fitted with software designed to cheat on pollution tests, German Transport Minister Alexander Dobrindt said Thursday in Berlin. The mandatory recall is the basis for callbacks throughout Europe, where diesel accounts for more than half the market.
Germany’s rare public snub of its biggest carmaker came after Volkswagen circumvented diesel emissions regulations starting in 2008. The country’s demands will speed a process that Volkswagen said will last beyond 2016, and give authorities more control.
“It’s an unusual measure to be ordering a mandatory recall,” said Arndt Ellinghorst, a Londonbased analyst with Evercore ISI. “It shows to me that the KBA is losing patience with VW’s slow response on what to do to fix the engines so far. Customers have been left unsettled.”
The 8.5 million affected cars represent slightly less than one-third of Volkswagen’s auto deliveries in the region from 2009 through August, based on sales figures the company published for the five divisions involved. The recall is also Germany’s biggest since its current rules took effect in 1997, more than the record 1.9 million cars the entire auto industry brought back in under repair programs last year, according to data from the Center for Automotive Management in Bergisch Gladbach, Germany.
The mandatory recall will be more expensive for Volkswagen because the company will need to work on the cars more quickly, Evercore’s Ellinghorst said. The manufacturer has yet to specify exactly how it will fix the cars, though it has said some will require only a software update while others will need new or rebuilt engine parts.
“The KBA’s decision opens up the possibility of a common and co-ordinated response in all European Union states,” Volkswagen CEO Matthias Mueller wrote Dobrindt on Thursday in a letter obtained by Bloomberg. “Such a unified procedure would be in the European spirit as well as in the interests of customers.”
Volkswagen must share technical details of its fix with authorities by mid-November, and the recall will begin in January. The KBA will test vehicles to ensure the repairs were successful, Dobrindt said. New parts necessary to fix some vehicles will probably be ready by next September, he said. Throughout Europe, Dobrindt has estimated that Volkswagen will probably need to exchange or rebuild parts for about 3.6 million engines.
Regulators in the U.S. haven’t announced a recall yet. The U.S. Environmental Protection Agency, which has jurisdiction over compliance with emission standards, said it will have to evaluate whatever repairs Volkswagen proposes before it’s made part of a recall.
The agency expects to receive information on Volkswagen’s proposed remedy for diesel vehicles with so-called Gen 2 emissions controls this week, Allen said. There’s no timeline for when EPA will order the recalls, she said.
The agency is still waiting on Volkswagen to provide information on vehicles with Gen 1 emissions controls, Allen said. According to VW, there are approximately 325,000 of those models — about two-thirds of the U.S. cars under investigation.
As Volkswagen grapples internally with the crisis, about 400 of its top executives met in Leipzig on Thursday. Another of the company’s top engineers, Falko Rudolph, chief of a parts factory near Kassel, was suspended as part of the investigation, a person familiar with the situation said, asking not to be named because the suspension is private. Rudolph couldn’t be reached for comment.