VW Emissions Scandal Leads To Suspension Of U.S., Canadian Sales

In a turnaround, Volkswagen Group suspended sales of additional diesel-powered vehicles in North America as the scandal widens over the automaker’s use of software designed to deceive emissions tests.

The company told dealers in the United States and Canada on Nov. 4 to stop selling cars from the 2013-2016 model years of VW and Audi with 3.0-liter engines. They include the 2013 Audi Q7, the 2014-2015 Audi A6, A7, A8, Q5 and Q7 and the 2013-2016 Volkswagen Touareg. The day before, VW-run Porsche had suspended sales of its Cayenne SUV for the model years 2014-2016.

The U.S. Environmental Protection Agency (EPA) said on Nov. 2 that some 10,000 VW, Audi and Porsche vehicles powered by 3.0-liter diesel engines had been equipped with software that under-reports the vehicles’ emissions of toxic nitrogen oxide during testing.

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VW at first disputed the EPA report and said it had no intention to suspend sales, but quickly changed its mind. Company officials in the United States said the suspension would last at least until it completes its review of the EPA’s test results, and they stressed that the tactic doesn’t necessarily mean it believes that even more cars are likely to have the illegal software.

Previously, the automaker had suspended U.S. sales of cars with smaller, 2.0-liter diesel engines after news broke that nearly 500,000 of them sold in the country had the software, known as a “defeat device.” Worldwide, VW says, as many as 11 million of its vehicles will need to be recalled and refitted with appropriate software.

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Besides these problems, VW said Nov. 3 that its own testing found “irregularities” in an additional 800,000 of its cars worldwide, although none of these cars are sold in the United States. In this latest case, the problem involves not nitrogen oxide but carbon dioxide and includes some models fitted not only with diesel engines but also, for the first time, 1.4-liter gasoline-powered engines.

This new revelation will add $2.2 billion to VW’s costs arising from the growing scandal. It was already facing $18 billion in penalties under the U.S. Clean Air Act, plus additional fines of more than $375 million if the latest EPA findings are borne out. The company says it’s also set aside $7.3 billion to recall the 11 million cars originally cited as needing new emissions software.

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As it turns out, VW’s troubles, in the United States at least, go beyond the use of the defeat device. On Nov. 4 it also recalled almost 92,000 recent models, saying they had been equipped with faulty camshaft lobes that can break, reducing braking effectiveness as well as engine power, which could increase the danger of a crash.

All these troubles have led Moody’s Investors Service to downgrade its rating on VW’s growing debt, which could make borrowing more expensive for the world’s second-largest automaker. Moody’s explained that there were “mounting risks to Volkswagen’s reputation and future earnings” as a result of the continuing bad news.

In the midst of the negative revelations, the European Commission (EC), the executive arm of the European Union, said in Brussels on Nov. 4 that VW should accelerate its probe into the scandal over the defeat devices. “Public trust is at stake here,” EC spokeswoman Lucia Caudet said.

By Andy Tully of Oilprice.com

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