Volkswagen Dieselgate Update: Judge Sets March Deadline For Repair Plan, EPA Asks For EVs, More

February 26, 2016

It's been another dizzying week of Volkswagen dieselgate news. Based on what we've seen, the company appears to be inching toward plans to repair 11 million "clean diesel" vehicles equipped with emissions-test-cheating software.

However, those plans may not be limited to a straightforward recall and fix. Chances are good that here in the U.S., at least, they'll also include investment in electric car technology and infrastructure, as well as programs to clean up the environmental damage Volkswagen's diesels have caused.

March 24 deadline set for diesel fix: Earlier this month, Volkswagen faced a deadline from the California Air Resources Board to submit plans for repairing 3.0-liter Audi, Porsche, and VW diesels. Though the automaker has been criticized for not taking the diesel scandal seriously and for not cooperating with U.S. regulators, Volkswagen managed to send over the necessary documents at the eleventh hour. 

There's no word yet on whether those plans are likely to be approved. However, we know for certain that CARB and the Environmental Protection Agency denied Volkswagen's initial proposal to repair 2.0-liter Audi and Volkswagen diesels, which make up roughly 85 percent of the 567,000 U.S. vehicles equipped with Volkswagen's illegal software.

Now, U.S. District Judge Charles Breyer has put his foot down. The judge has given Volkswagen until March 24  to submit final plans to fix those vehicles, saying that "six months is long enough" to find a solution. (News of "dieselgate" first broke in late September 2015).

Breyer didn't indicate what might happen if Volkswagen fails to comply, and Volkswagen's attorney Robert Giuffra didn't comment on Volkswagen's current plans. However, we'd wager that Volkswagen's chances of avoiding the maximum $48 billion in fines go up if the company does as Judge Breyer says.

At this point, Volkswagen's job is to determine how to lose the least money. Since the company seems to think that meeting U.S. emissions regulations is impossible, we could be looking at a significant number of buybacks. Stay tuned, this could get ugly (or rather, uglier).

EPA wants Volkswagen to built EVs: Back in December, Elon Musk and 44 other entrepreneurs wrote a letter to the California Air Resources Board, asking that Volkswagen not be required to fix its illegal diesels or pay hefty fines. Instead, they asked CARB to force Volkswagen to produce more electric vehicles.

The letter was a bit tongue-in-cheek, but apparently, the EPA has taken the idea and run with it. An unsourced report in Germany's Welt newspaper says that the EPA has asked Volkswagen to manufacture EVs like the Budd-e concept above at its plant in Chattanooga, Tennessee. If the report is correct, the EPA has also asked Volkswagen to help build America's charging infrastructure for electric cars.

Neither the EPA nor Volkswagen has commented on the report, and their reluctance suggests there could be something of the truth in it. We won't know for certain until Volkswagen submits its fix plan to the EPA and the EPA approves, tweaks, or rejects it.

Volkswagen could have to clear the air: Since 2009, diesel vehicles from Audi, Porsche, and Volkswagen have been cheating on emissions tests, spewing up to 40 times the legal limit of pollutants into the atmosphere. Resolving the problem may involve more than just fixing those vehicles and building zero-emission electric cars: it could also involve taking some of that pollution out of the air.

There is, in fact, precedent for this: in the 1990s, truck manufacturers like Volvo and Caterpillar were found guilty of similar misdeeds (i.e. cheating on emissions tests) and forced to pony up more than $1 billion. Most of that money was invested in developing cleaner engines. 

Volkswagen's case is a bit more complicated. A huge chunk of the company's money will have to be used to repair or buy back vehicles. Some will be spent on fines and court cases. And it's likely that at least a bit of it will be invested in electric vehicle technology. However, given the projected size of the payout, we'd be surprised if a portion of the money weren't used on remediation projects, too.

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