VW Diesel-Emissions Scandal

 German prosecutors raided Volkswagen's Wolfsburg, Germany, headquarters on December 3, as part of a fresh investigation into diesel VWs. This time, they are reportedly interested in the EA288 four-cylinder engine, successor to the EA189 diesel engine around which the Dieselgate investigation has centered. Reuters cited Volkswagen as saying the EA288 engine did not have a "defeat" device to beat emissions testing. We will update with new information as it becomes available.

General Motors and Toyota had their massive scandals. Now it’s Volkswagen’s turn. The company, which owns 70 percent of the U.S. passenger-car diesel market, is in major trouble for cheating on diesel-emissions tests. After years of promoting “Clean Diesel” as an alternative to hybrid and electric vehicles—the company even marched on Washington with a squadron of Audi TDI models—Volkswagen is stewing in its own toxic vapors. Here’s our handy guide to what’s happening.

What happened?

Volkswagen installed emissions software on more than a half-million diesel cars in the U.S.—and roughly 10.5 million more worldwide—that allows them to sense the unique parameters of an emissions drive cycle set by the Environmental Protection Agency. According to the EPA and the California Air Resources Board, which were tipped off by researchers in 2014, these so-called “defeat devices” detect steering, throttle, and other inputs used in the test to switch between two distinct operating modes.

In the test mode, the cars are fully compliant with all federal emissions levels. But when driving normally, the computer switches to a separate mode—significantly changing the fuel pressure, injection timing, exhaust-gas recirculation, and, in models with AdBlue, the amount of urea fluid sprayed into the exhaust. While this mode likely delivers higher mileage and power, it also permits heavier nitrogen-oxide emissions (NOx)—a smog-forming pollutant linked to lung cancer—up to 40 times higher than the federal limit. That doesn’t mean every TDI is pumping 40 times as much NOx as it should. Some cars may emit just a few times over the limit, depending on driving style and load.

Which cars are affected? Will my car pass state inspection?

The following Volkswagen, Audi, and Porsche diesel models have been cited by the EPA for emissions violations. There is no recall, and the cars pass all state inspections, at least for now. Remember, VW has admitted to violating federal emissions laws, and as such, it’s neither a state nor a safety issue. However, if Volkswagen does issue a recall, some states (particularly California and some that follow Partial Zero Emissions Vehicle standards) may prevent owners from renewing their registration if they don’t complete the fix.

2009–2015 Volkswagen Jetta 2.0L TDI

2010–2015 Volkswagen Golf 2.0L TDI

2010–2015 Audi A3 2.0L TDI

2012–2015 Volkswagen Beetle 2.0L TDI

2012–2015 Volkswagen Passat 2.0L TDI

2009–2015 Audi Q7 3.0L V-6 TDI

2009–2016 Volkswagen Touareg 3.0L V-6 TDI

2013–2016 Porsche Cayenne Diesel 3.0L V-6

2014–2016 Audi A6 3.0L V-6 TDI

2014–2016 Audi A7 3.0L V-6 TDI

2014–2016 Audi A8/A8L 3.0L V-6 TDI

2014–2016 Audi Q5 3.0L V-6 TDI

What diesels can’t I buy?

Volkswagen, Audi, and Porsche dealers can’t sell any new diesels, except for certain 2015 models sold as new. They also cannot sell most used and certified pre-owned diesels. Volkswagen has since committed to electric cars, and it’s possible the company will not sell a TDI diesel in the U.S. ever again.

What’s Volkswagen doing for customers? And when can I get my car fixed?

Buybacks and compensation for 2.0-liter Volkswagen and Audi TDI models:

U.S. District Court Judge Charles Breyer approved the final $14.7 billion settlement on October 25, 2016, after which Volkswagen will start mailing notifications to all current affected owners and lessees of 2.0-liter cars informing them of the $10 billion buyback program. Judge Breyer had approved the preliminary settlement for the same amount on July 26, 2016. TDI owners who purchased their cars before September 17, 2015, can sell their cars back to Volkswagen for between $12,500 and $44,000, depending on model, age, trim, and region. TDI lessees will receive a cash value between $2600 and $4900. Owners and lessees who sold their cars or quit their leases before June 28, 2016, are also eligible. The buyback process started in November 2016. Official details and a VIN lookup are here. Exact payouts for all affected models can be found here.

Through October 18, 2016, 340,000 owners and lessees have sent in registration forms indicating they want the company to buy back their cars under the government-negotiated compensation agreement. That’s nearly three-quarters of all 475,000 Volkswagen and Audi models with 2.0-liter diesel engines currently registered on U.S. roads.

Owners who do not sell their cars back to Volkswagen will receive between $5100 and $10,000 to compensate for diminished resale value, plus a free emissions fix (see full details here). All owners and lessees of 2.0-liter TDI models will have up to May 2018 to decide their options. The approximately 3500 owners and lessees who previously opted out of the settlement have until May 12, 2017, to accept the terms and collect their payments.

Owners are also eligible to receive up to $350 each as part of a separate $327.5 million settlement with Bosch, the supplier of the emissions software (lessees each receive $200). Details are available here. The eligibility dates for the VW settlement correspond to the day immediately before the EPA first announced the violations and the day the EPA announced its preliminary settlement with the Department of Justice and the Federal Trade Commission.

What if I owned an affected Volkswagen or Audi TDI model but sold or traded it in before the diesel-emissions scandal became public?

In early October 2018, U.S. District Court Judge Charles Breyer ruled that consumers could join in class-action lawsuits even if they previously owned or leased a “clean diesel” product but no longer had it at the time the fraud charges came to light. The judge ruled that TDI technology increased the price of the VW and Audi vehicles and therefore added to the amount they depreciated, meaning the owners could still have been harmed.

Repairs and fixes for 2.0-liter Volkswagen and Audi TDI models:

There are three generations of the 2.0-liter turbo-diesel four-cylinder, and all will require different fixes (from simple software updates to complete, and potentially performance-crippling, hardware retrofits). As of January 6, 2017, Volkswagen announced a complete fix for 2015 TDI models with the third-generation engine. This will involve installing a second NOx sensor and a new or replacement diesel-oxidation catalyst. In March 2017, VW received approval to sell these cars, of which there are approximately 12,000 new and 67,000 used.

On May 19, 2017, VW received approval to repair 2012–2014 Passat TDI models. A total of 84,391 cars are included, except those with manual transmissions; CARB said VW had not shown sufficient evidence that they will be made compliant. VW is awaiting approval to resell these vehicles as used cars.

Buybacks and compensation for 3.0-liter Volkswagen and Audi TDI and Porsche diesel models:

As of December 21, 2016, Volkswagen reached a second settlement with the roughly 78,000 owners and lessees of 3.0-liter diesel models. In late January 2017, Volkswagen announced a $1.2 billion program that differs substantially from the $10 billion program for 2.0-liter diesel models. Judge Breyer approved the final settlement amount on May 11, 2017. Currently, only owners of 2009–2012 Audi Q7 and Volkswagen Touareg models with the Generation 1 engine are eligible for buybacks between $24,755 and $57,157. This is because Volkswagen cannot repair them to be emissions compliant. Generation 1 lessees of 2012 vehicles can receive between $5001 and $6615 for terminating their leases early. Generation 1 owners who do not sell their cars back to Volkswagen can receive $7755 to $13,880.

For Generation 2 models between 2013–2016, Volkswagen will offer cash compensation ranging from $7039 to $16,114; if the recall isn’t made “timely available,” the automaker will buy them back for prices between $43,153 to $99,862 and extend any warranties that might expire until the recall is ready. Generation 2 lessees can receive between $5677 and $12,492 for terminating their leases early. If lessees decide to keep their cars and perform the fix, they each receive a flat $2000. In all cases with Generation 2 cars, owners and lessees can opt to receive half of the cash payments up front and the other half once the vehicle is repaired. Generation 2 owners and lessees are also eligible to receive up to $1500 each as part of a separate $327.5 million settlement with Bosch, the supplier of the emissions software. Details are available here.

These prices have been set using NADA Used Car Guide Clean Retail values as of November 2015 and adjusted for options, mileage, and the region the vehicle was registered in as of that month. The 2016 diesel models will be repurchased at 12.9 percent above prices for equivalent 2015 models. Owners and lessees will also be reimbursed for state and local taxes. The registration deadline is December 31, 2019. Owners and lessees will get the same payment (adjusted for mileage) regardless of when they register.

Repairs and fixes for 3.0-liter Volkswagen and Audi TDI and Porsche diesel models:

There are two versions of the 3.0-liter turbo-diesel V-6 that require different modifications. The Generation 1 engines in the 2009–2012 Audi Q7 and Volkswagen Touareg cannot be made fully compliant with EPA regulations. Generation 2 engines in 2013–2016 models will be fixed under a recall covering 38,745 vehicles. The 2013–2014 Touareg, 2013–2014 Cayenne, and 2015 Q7, all with the so-called Generation 2.1 version of the 3.0-liter TDI V-6, will receive a software upgrade and a hardware fix. The 2015–2016 Touareg and Cayenne models (with the Generation 2.2 engine) will get only software changes. Owners who opt for the fix still additionally receive roughly $8500 to $17,500. On those 58,000 models, Audi said on November 23, 2015, that it would update the software and “resubmit” its emissions applications after the EPA found undocumented “auxiliary emission control devices” that were allowing excessive levels of NOx.

Expired incentive programs:

As part of its Customer Goodwill package, Volkswagen offered $1000 cash to every owner of a 2.0-liter TDI named in the EPA’s first violation notice: a $500 prepaid Visa card to spend on anything and another $500 cash card valid only at Volkswagen dealerships (to use toward another car, service, or lots of VW hats). They also could get free 24-hour roadside assistance for the next three years. The deadline to register for that program ended April 30. The same offer was extended to owners of 3.0-liter diesel models, who had until July 31. Audi, Porsche, and VW TDI owners who took delivery after November 8 were not eligible (full rules here). Current owners of any VW model were also able to get a $2000 cash rebate toward a new car, although this incentive may continue to vary or expire as time progresses. Dealers also have “discretionary” cash they can use to sweeten deals (and they’re getting guaranteed kickbacks for some models). Basically, if Volkswagen is on your shopping list, now’s the time to haggle like a pro.

Don’t all automakers tailor their cars to ace the EPA test cycle? Why single out VW?

Automakers optimize powertrains for each second of the EPA’s dynamometer tests (Federal Test Procedure 75, the one VW’s computers detect, runs for 1370 seconds). They have to, because they’re required to self-certify every model on sale. The EPA verifies roughly 15 percent of those tests each year. In rare cases, automakers grossly overstate fuel economy (as Ford and Kia did) and can take advantage of loopholes in the certification process.

Yet these standardized tests, as flawed as they may be in comparison to real-world driving, are critical. Performed correctly, they’re at least an accurate method to assess legal compliance and provide a fair comparison for consumers. Right now, there’s no indication that automakers program their cars to run in a wildly different fashion on the road, even as the EPA and the German government attempt to prove otherwise. Volkswagen explicitly did, and that’s why it’s getting hammered.

What are selective catalytic reduction and urea injection?

Diesel fuel is carbon rich and close in composition to home heating oil. As such, it’s inherently dirty and sooty when burned. While heavy-duty diesel pickups, vans, trucks, and other commercial vehicles follow looser environmental standards, light-duty vehicles have it tough—and nowhere is it tougher to certify a diesel car or truck than in the U.S. In order to trap particulates and curb nitrogen oxide in practically all new diesel engines, selective catalytic reduction (SCR) and urea injection must be used.

A three-way catalytic converter in gasoline vehicles treats exhaust gas by both oxidizing (adding oxygen to convert carbon monoxide and other hydrocarbons to carbon dioxide and water) and reducing (removing oxygen to convert nitrogen oxide to nitrogen and water). But diesel engines burn so lean that they require separate oxidation and reduction catalysts. After diesel exhaust passes through the oxidation catalyst and a particulate filter, diesel exhaust fluid (DEF, branded by VW as AdBlue) is injected into the stream before entering the reduction catalyst. DEF is a precise mixture of one-third urea and two-thirds deionized water and must be refilled (typically at manufacturer-recommended oil-change intervals) from a separate tank.

If this sounds complex and expensive, that’s because it is. And very likely, that’s why VW chose not to install SCR and urea injection on most of its TDI models.

What’s going to happen to Volkswagen?

On January 11, 2018, the news came that VW is suing at least one of its former executives who was sentenced to federal prison for his role in the company's diesel emission scandal. According to Automotive News, the automaker wants to "recover a large part" of the legal costs it spent defending Oliver Schmidt, which amount to more than $4 million. Schmidt was formerly general manager of the company's environmental office in Michigan. In December 2017, he was sentenced to seven years in prison and ordered to pay a $400,000 fine. Five other VW executives have been charged, while a lower-ranking engineer was also sentenced to prison in January 2017.

On January 11, 2017, the U.S. Department of Justice announced $4.3 billion in criminal and civil penalties and arrested six VW executives for their alleged connection with the scandal. A total of eight current and former executives have been charged with various crimes. On August 21, 2017, VW engineer James Liang was sentenced to 40 months in prison and a $200,000 fine. He pleaded guilty in September 2016. Oliver Schmidt, former general manager of the company’s environmental office in Michigan, was sentenced on December 6 to seven years in prison and a $400,000 fine by U.S. District Court Judge Sean Cox in Detroit, who called Schmidt a “key conspirator” who “knowingly misled and lied to government officials.” A “corporate compliance monitor” will be watching VW for three years under the terms of its probation. On April 21, 2017, VW was officially sentenced in a Michigan federal court for these violations.

On January 4, 2016, the U.S. Department of Justice first sued Volkswagen on behalf of the EPA. Volkswagen will now pay $14.7 billion to settle with three federal agencies suing the automaker for its excessive diesel emissions, the highest ever paid by a company for violations under the Clean Air Act. The Environmental Protection Agency, the Federal Trade Commission, and the Department of Justice announced the partial settlement on June 28, 2016. Aside from the $10 billion buyback program, another $2.7 billion will fund future state-level projects that reduce nitrogen-oxide emissions under the EPA’s Diesel Emissions Reduction Act, which are federal grants marked to replace old diesel engines and for retrofit kits for alternative-fuel powertrains and other similar vehicle hardware.

Volkswagen must buy back 85 percent of all cars by June 2019, or else it must pay even more to fund such projects. The automaker also must spend $2 billion over the next 10 years to invest in green energy and electric cars, including paying for new public charging stations and public-education programs.

Under the latest settlement with 3.0-liter diesels, Volkswagen will also be required to pay an additional $225 million toward projects that reduce NOx emissions. California will receive $41 million of that, and the California Air Resources Board (CARB) wrote into the settlement some very specific requirements for the sale of electric vehicles.

A Canadian settlement, which keeps to terms that are comparable to the U.S. settlement finalized in October, will cover about 105,000 vehicles there and potentially cost the automaker the equivalent of U.S. $1.6 billion. As in the United States, Canadian owners will be eligible to sell their vehicle back at an agreed-upon price or opt to fix their vehicle and receive a payment. And under a tentative consumer settlement in Canada, Volkswagen and Audi Canada will pay out the equivalent of U.S. $11.2 million.

Additional civil penalties and further state-level fines have not been determined but could add billions more. Volkswagen had originally set aside more than $7 billion to cover recall-related costs.

Since news of the first violation broke on September 18, 2015, more than a quarter of the company’s market cap has been wiped out with its nosediving stock price through June 28, 2016, and the company has abandoned its goal of becoming the world’s largest automaker by 2018. Volkswagen is not even concerned with its U.S. sales numbers until this problem is resolved, according to chairman Herbert Diess. The company has posted consecutive U.S. monthly sales losses since November.

CEO Matthias Müller—who said the company didn’t lie but faces a “technical problem“—has now ordered a complete reorganization that will see 30 battery-electric vehicles introduced across its 12 divisions by 2025. It inevitably will lead to firings, model cuts across its 340 variants, and other corporate changes. So far, though, even seemingly frivolous divisions like Bugatti aren’t getting axed. Former CEO Martin Winterkorn, who resigned in September, reportedly received a memo regarding the diesel problem in May 2014. He has not confirmed whether he actually read it.

All right, I’d like some more free money. How can I sue?

There are already a couple hundred lawsuits alleging economic harm against VW’s now infamous “Clean Diesel” marketing campaign and the half-million cars under EPA violation. None have yet been consolidated before the Judicial Panel on Multidistrict Litigation. For the time being, Hagens-Berman, a huge firm that squeezed $1.1 billion from Toyota and intends to sue General Motors for $10 billion, has a class-action lawsuit ready and waiting.

What are TDI owners actually doing?

As Greenpeace and other environmental groups lambaste VW, the obligatory news articles profiling angry TDI drivers have popped up. Granted, there are some people genuinely upset with VW for misleading them about their car’s emissions levels. But as we see it, the majority of TDI buyers are knowledgeable enthusiasts in love with sky-high fuel economy, torque, durability, and low running costs. Some really frugal types convert their TDIs to run on refined vegetable oil or biodiesel. These people are die-hards.

If any fix Volkswagen proposes ends up hampering performance—be it increased fuel consumption or a loss of power—many TDI owners may very well ignore a recall. It’s a tricky legal situation, as neither the EPA nor the National Highway Traffic Safety Administration can force individual owners to update their cars. Several bills in Congress have proposed banning registration renewals for car owners who don’t complete recalls, but they’re a long way from becoming law. For now, most TDI owners are continuing to putter about, despite a considerable drop in resale values. With more time, we’ll have a fuller picture.

This story was originally published on November 13, 2015; it is being constantly updated to reflect the latest developments in the VW diesel-emissions scandal.