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VW could face $18 billion fine for evading smog rules, cheating pollution tests

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In this photo taken Feb. 14, 2013, a Volkswagen logo is seen on the grill of a Volkswagen on display in Pittsburgh.

Federal and California environmental regulators accused Volkswagen of using software that cheats pollution testing in nearly 482,000 recent model VWs and Audis by circumventing emission standards in its diesel cars.

The German automaker, which has admitted manipulating the cars, will eventually have to recall all of the vehicles and change the emissions systems at its own expense, regulators said. Additionally it could face a fine of about $18 billion, or $37,500 per car, federal environmental officials said.

The software trick allows the cars to emit up to 40 times the legally allowable pollution, environmental officials said.

The Environmental Protection Agency on Friday issued the German automaker a “notice of violation” of the Clean Air Act for both VW models and the company’s Audi luxury brand. It covers models equipped with 2.0-liter, four-cylinder diesel engines. The California Air Resources Board issued a similar letter.

Volkswagen and Audi vehicles from model years 2009 to 2015 have the software, which uses an algorithm that detects when the vehicle is undergoing pollution tests and changes the way it performs.

It “is illegal and a threat to public health,” said Cynthia Giles, assistant administrator for the Office of Enforcement and Compliance Assurance. “EPA is committed to making sure that all automakers play by the same rules.

“We expected better from VW,” Giles said.

Volkswagen admitted that the cars contained “defeat devices,” after EPA and CARB demanded an explanation for the identified emission problems.

Volkswagen is the world’s biggest auto company, outselling Toyota and General Motors so far this year.

Air Resources Board Executive Officer Richard Corey said the California agency will “dig more deeply into the extent and implications of Volkswagen’s efforts to cheat on clean air rules, and to take appropriate further action.”

Volkswagen said it is cooperating with the investigation but declined further comment.

Corey said the Air Resources Board became suspicious after hearing about emissions problems from automotive pollution analysts in Europe. Additionally, researchers at West Virginia University, working with the International Council on Clean Transportation, a non-governmental organization, raised questions about emissions levels.

ARB investigators started testing the vehicles both on a special dynamometer in a laboratory and on the open road using portable equipment.

The investigation showed the cars behaving quite differently on the open road than in EPA testing environments.

The agency devised special test that detected how software on the engine’s electronic control module was fooling the certification tests.

Specifically, the vehicles produce too much nitrogen oxide, which “under the hot California sun cooks and creates ozone and fine particles” resulting in more smog.

The affected diesel models include: Jetta (model years 2009-2015,) Beetle (model years 2009-2015,) Audi A3 (model years 2009-2015) Golf (model years 2009-2015) and Passat (model years 2014-2015).

VW programmed the engines to detect certification tests over many years and through three generations of engines, said Dave Sullivan, manager of product analysis at the AutoPacific Inc. consulting firms.

Officials did not specify VW’s motivation for cheating, but the most obvious benefits would be to increase real-world performance or fuel economy, Sullivan said.

Luke Tonachel, director clean vehicles and fuels project at Natural Resources Defense Council, was puzzled as to why VW would have to cheat.

“Other vehicle manufacturers don’t appear to be doing the same thing but still get good performance from diesel vehicles so it is hard to say why VW was doing this,” Tonachel said.

But he was outraged by the VW’s actions.

“Tightening government standards are making cars cleaner and it is disturbing to learn that VW is flouting those standards,” Tonachel said. “The EPA action is important to protecting public health.”

Consumers should not read VW’s action as an indictment of diesel cars, said Don Anair, research director for the Clean Vehicles Program at the Union of Concerned Scientists.

“There has been major progress in advancing emissions controls for diesels over the past 10 years,” Anair said. “That’s a fact. This is a problem with the manufacturer, not the technology.”

VW will have to develop a fix to bring the cars into compliance with federal and state clean air regulations and recalls the vehicles at its own expense, regulators said. Owners can continue to drive the cars — there is no safety issue — and can still sell them, regulators said.

But once there’s a repair to bring the vehicles into compliance, both clean air officials and the automaker may have trouble getting owners to cooperate, Sullivan said.

“Diesel buyers for VW tend to be enthusiasts,” Sullivan said. “It is not like the engines are catching on fire. They will think that if it is not broken, why fix it?”

Owners also expressed anger.

“It’s just a blatant disregard and intentional manipulation of the system,” said Priya Shah, a San Francisco owner of a 2012 VW diesel Jetta station wagon. “That’s just a whole other level of not only lying to the government, but also lying to your consumer. People buy diesel cars from VW because they feel they are clean diesel cars.”

Shah said the car is likely to be her last Volkswagen.

“I don’t want to be spewing noxious gases into the environment,” she said.

Volkswagen will face several class action and consumer fraud lawsuits within days, said Steve Berman, a class action attorney in Seattle who has successfully brought such cases against Toyota, Hyundai among others.

Berman said he is already preparing a lawsuit on behalf of a Marin County, Calif. owner who bought a VW because it was marketed as a clean car and “now they find out it was polluting the environment at 40 times standards.”

The automaker will be subject to Virginia consumer fraud laws — its U.S. headquarters is located in Herndon, VA. — which provide a minimum of $1,000 in damages per violations, Berman said.

“That makes for a minimum of $482 million in damages but I think the actual number will be higher,” Berman said.

VW also will face what is known as a “diminished value” lawsuit because the vehicles are likely to lose a portion of their resale value because of the problem, he said.

“They will have to retool the emission’s system and that will hurt the performance of the car,” Berman said.

He believes the software sets the emission system to shut down or dials back at times when the car needs high performance. Any fix will turn it on fully and that will degrade performance and the cars will become less valuable, he said.

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