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VW America: 'This was not a corporate decision'

Volkswagen's US chief Michael Horn doesn't believe his bosses in Germany orchestrated the emissions scandal. The US Congress isn't buying that explanation and is demanding massive compensation for dealers and customers.

It was the most direct

line of questioning

that a senior Volkswagen official has faced from an elected official since the diesel emissions scandal broke last month.

"Did VW install the software for the express purpose of defeating emissions controls?" asked Representative Tim Murphy of Pennsylvania, chairman of the US congressional panel that has previously investigated General Motors and Toyota.

Michael Horn, chief executive of Volkswagen Group of America, was direct in his response: "To our understanding, and this is part of the investigation, it was installed for this purpose, yes," Horn said.

The US VW chief executive told Congress on Thursday that he personally had no prior knowledge that a "defeat device" had been installed in Volkswagen diesel vehicles.

Horn said he first learned of the software manipulation last month after corporate headquarters in Germany had come clean with the US Environmental Protection Agency. He said he felt personally deceived.

USA Anhörung VW Abgas-Skandal - CEO Michael Horn

Volkswagen US CEO Michael Horn

But Horn defended his bosses in Wolfsburg, saying that the decision to install a defeat device was made by lower-ranking engineers, not Volkswagen's

senior leadership

.

"This was not a corporate decision, from my point of view," Horn said. "To my best knowledge today, the corporation in no board meeting, no supervisory board meeting, has authorized this."

"This was a couple of software engineers who put this in for whatever reason," he continued.

'Complicit at the highest levels'

Congress wasn't buying it. Representative Chris Collins of New York accused Volkswagen of "not admitting yet the severity" of the scandal and responding with "arrogance."

Collins said Volkswagen engineers were most likely under pressure from senior officials to complete a mission impossible - creating a high performing, clean diesel engine that met US emissions standards. When the problem couldn't be resolved, the engineers found a solution for management - cheating, according to Collins.

"I cannot accept VW's portrayal of this as something by a couple of rogue software engineers," the representative from New York said. "This problem was going way up the chain."

"They are complicit at the highest levels of a massive cover up that continues today," he continued.

The supervisory board at VW probably didn't know the details of what was happening, according to Peter Henning, an expert on white collar crime and the automobile industry at Wayne State University. But the motivation to cheat was likely created through a

corporate culture set at the top

.

"Every mid-level manager faces the pressure to meet a sales target, profitability, whatever it is," Henning told DW. "That's where you start seeing people cutting corners."

Henning said the question now is whether the senior leadership has "plausible deniability."

'Still working on time frame'

There's no easy fix for 430,000 of the diesel vehicles that have the illegal defeat devices installed, according to Horn. The US VW chief described the defeat device as a line of software code installed in the vehicles that tricks EPA emissions tests.

When tested in a lab or garage, the vehicles give nitrogen oxide emissions readings that comply with the law. But on the road, the vehicles emit up to 40 times what's allowed.

The offending software in generation one vehicles, which came on the US market beginning in 2009, cannot simply be removed, according to Horn. It could take more than a year, perhaps longer, to fix all 430,000 automobiles given that each repair takes between five to 10 hours. Horn said VW is "still working on the time frame, and it's sill too early to say exactly when this fix will take place."

"Normally you estimate the recall time once you have the fix," Henning at Wayne State University said. "We're not even there yet. A year and a half is a guess."

Demands for compensation

Volkswagen's 650 dealerships in the US have been wired discretionary funds to help deal with the fallout from the emissions scandal, according to Horn. He declined to share the exact figure. The US VW chief executive acknowledged the automaker also has a responsibility to compensate vehicle owners.

Several members of Congress told Horn that Volkswagen should consider buying back the 500,000 diesel vehicles with the defeat device. At $40,000 a piece (35,500 euros), a buyback program would amount to $20 billion, according to Representative Collins. So far, Volkswagen has set aside 6.5 billion euros to deal with the scandal.

"6.5 billion euros is off by an order of magnitude," Collins said. "If you told us today you had set aside 68 billion, I'd say you were probably in the ballpark."

According to Henning, when companies are in hot water with the law, they almost always give low estimates of what's owed in damages.

"Their first offer is a low ball, here's the minimum we can get away with, with a straight face," he said. "That number is going to come in substantially higher, just like it did for BP in the Gulf oil spill."

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