Volkswagen Dieselgate update: California rejects 3.0-liter fix (again), fines VW $86 million

July 14, 2016

Tesla isn't the only automaker that's having a bad week. If Elon Musk is buying, Volkswagen could use a drink or three.

At the end of June, Volkswagen's Dieselgate scandal seemed like it was finally coming to an end--or at least the beginning of an end. After nearly ten long, confusing months, the automaker announced details of a $15.4 billion settlement with the U.S. Environmental Protection Agency, the California Air Resources Board, and the Federal Trade Commission.

For that tidy sum, Volkswagen will compensate 475,000 American owners of 2.0-liter Audi and VW diesels for illegally equipping those cars with emissions test-cheating software. The settlement also includes a plan to buy back or fix those vehicles and to repair some of the environmental damage the cars have caused by dumping up to 40 times the legal limit of pollutants into the atmosphere.

But now, two weeks later, the fahrvergnügen has faded, as Volkswagen faces another wave of bad news:

1. California snubs Volkswagen's second 3.0-liter diesel fix: Apart from all those illegally rigged 2.0-liter Audi and VW "clean diesels" roaming U.S. roads, there are also some 85,000 3.0-liter Audi, Porsche, and VW models that fail to meet emissions standards. In January, CARB and the EPA rejected Volkswagen's plan to repair those vehicles and complained very loudly about the automaker's seriousness and the thoroughness of its plans. Volkswagen went back to the drawing board, but its Plan B has been now shot down, too.

In a letter to Audi and VW, CARB says that "VW's and Audi's submissions are incomplete, substantially deficient, and fall far short of meeting the legal requirements to return these vehicles to the claimed certified configuration". Ouch. The letter to Porsche isn't much kinder. If the companies can't come up with workable repair plans by December, they may be forced to buy back the offending vehicles. 

So...third time's the charm?

2. California fines Volkswagen $86 million: Adding insult to injury, California has announced that Volkswagen will pay the state $86 million in civil penalties. (Criminal penalties? Stay tuned.) Of that sum, $76 million will be used to defray legal and investigative costs associated with the ten-month-long Dieselgate emissions scandal. The remaining $10 million will be awarded to researchers so they can find ways to detect and disable defeat devices like Volkswagen's in the future.

3. Volkswagen's costs could climb or fall: Volkswagen's U.S. settlement announced at the end of June is projected to cost the automaker some $15.4 billion. However, that figure could go up or down, depending on whether regulators approve the company's fixes for 2.0-liter diesels.

If they do, and if most owners opt for repairing their cars rather than selling them back to Volkswagen, the automaker could save some dough. If, on the other hand, the fixes aren't approved--or if they are, and consumers choose the buyback option anyway--costs could spiral closer to $16 billion, or higher. 

4. VW hasn't even asked the EPA to approve new diesels: When Dieselgate hit the headlines last September, VW's 2016 diesel models hadn't yet been approved for sale by the EPA. VW subsequently withdrew its application for those vehicles, and to date, it hasn't resubmitted the necessary paperwork. Given the heightened scrutiny that the agency will likely focus on VW and the time it takes to approve such applications...well, let's just say that if you're waiting for a 2016 VW diesel, you ought to bring a book.

5. South Korea may suspend VW sales altogether: Regulators around the globe are furious with Volkswagen because of the Dieselgate scandal, but few are as hopping mad as South Korea. The country filed criminal charges against Volkswagen back in January, and now, government officials say they may suspend all Audi and VW sales. Not that that would hurt Volkswagen much: sales in South Korea have already fallen more than 33 percent since the scandal broke. 

Note: for purposes of clarity, "Volkswagen" has been used to refer to the Volkswagen Group parent company, while "VW" has been used to refer to the company's popular mass-market brand of automobiles.

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