HomeBusiness BuzzVW forced to recall 2,4mln rigged diesels after Germany takes hard line

VW forced to recall 2,4mln rigged diesels after Germany takes hard line

 The German government forced Volkswagen AG to recall about 2,4 million diesel cars after throwing out the carmaker’s proposal for voluntary repairs, setting off a chain reaction by authorities across Europe.

The Federal Motor Transport Authority, or KBA, demanded the recall after reviewing proposals Volkswagen filed last week to fix cars fitted with software designed to cheat on pollution tests, German Transport Minister Alexander Dobrindt said Thursday in Berlin. A mandatory recall will speed the process, which Volkswagen has said will take until the end of next year, and give authorities more control.

Germany’s rare public snub to its biggest carmaker came after Volkswagen circumvented emissions regulations starting in 2008. Germany’s demands will set the tone for the rest of Europe, where diesel dominates the market and the illegal software is installed in some 8 million vehicles. Authorities in Austria and Switzerland said the recall applies to cars sold there as well, adding almost another half-million autos to the total.

“It’s an unusual measure to be ordering a mandatory recall,” said Arndt Ellinghorst, a London-based analyst with Evercore ISI. “It shows to me that the KBA is losing patience with VW’s slow response on what to do to fix the engines so far. Customers have been left unsettled.”

The mandatory recall will be more expensive for Volkswagen because the company will need to fix the cars more quickly, Ellinghorst said. The company has yet to specify exactly how it will fix the cars, though it has said some will require only a software update while others will need new or repaired engine parts.

 

November Deadline

 

Volkswagen must tell authorities by the end of November exactly how it will fix the cars, and the recall will begin in January. The KBA will test vehicles to ensure the repairs were successful, Dobrindt said. New parts necessary to fix some vehicles will probably be ready by next September, he said. Throughout Europe, Dobrindt has estimated that Volkswagen will probably need to exchange or rebuild parts for about 3,6 million engines.

A Volkswagen spokesman said the company is reviewing the KBA’s decision. About 400 of the company’s top executives are meeting in Leipzig to discuss the diesel scandal Thursday.

The company admitted in September to designing software so that 482 000 of its diesel cars in the U.S. would turn on full pollution controls only when undergoing laboratory emissions testing, not on the road. Since then the deception has been shown to be far broader, affecting about 11 million cars worldwide. The software was also active in diesels VW sold with the same EA189 engine in Germany, Dobrindt said Thursday.

“The KBA is under pressure to show to the public they’re on top of this and that they’re in the driver’s seat,” said Stefan Bratzel, head of auto research at the University of Applied Sciences in Bergisch Gladbach, Germany. “Recalls to fix key safety issues that go to the core of a vehicle’s operation almost always occur voluntarily, with the KBA monitoring. So making this fix — while the cars are running safely — a mandatory one shows the political pressure.”

The shares were up 0,6% to 107,25 euros at 11:21 a.m. in Frankfurt. The diesel crisis has wiped some 19 billion euros ($21,8 billion) off Volkswagen’s market value.

The pressure on VW extends beyond Germany. The Italian finance police also searched the carmaker’s offices in Verona on Thursday, Ansa newswire reported. A spokeswoman for Volkswagen in Italy wasn’t immediately available for comment. German prosecutors also raided VW facilities and private homes last week as part of a criminal investigation.-Bloomberg

 

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