BERLIN Volkswagen's delay in announcing it had cheated U.S. diesel emission tests was a legitimate move in seeking to first strike a deal with regulators, the carmaker's lawyers said in an official report seen this week by Reuters.
Following is an account by VW and its German law firm Goehmann of events leading up to the violation of U.S. emissions law being publicly announced by the U.S. Environmental Protection Agency on Sept. 18, 2015. 2005: VW decides to promote its diesel technology, already popular in Europe, in the United States, with the development of a new engine, the EA 189.
November 2006: VW's lawyers say in their report that the modification of the engine management software was probably carried out at this time. Staff in the powertrain electronics department (EAE), diesel engine development (EAD) and the engine test centre (EAS) were involved in the software changes.
In the ensuing period, staff which VW says have yet to be identified decided to modify the software to meet strict U.S. emissions limits. The modification was relatively small and could be done within budget and without involving higher levels of management, VW said.
May 15, 2014: The International Council on Clean Transportation (ICCT) publishes a study that shows nitrogen oxide values for two VW diesel vehicles deviated significantly between bench testing and road operation.
The California Air Resources Board (CARB) requests an explanation from Volkswagen Group of America and launches its own examination of emissions of a VW vehicle. The U.S. Environmental Protection Agency (EPA) follows with a separate investigation. Over the following months, VW carries out internal verification tests which subsequently confirmed the ICCT's findings.
May 23, 2014: A memo about the ICCT study is prepared for Chief Executive Martin Winterkorn which was included in what VW calls his "extensive weekend email". VW says it has not been documented as to whether, or how much, Winterkorn took notice of the memo.
Nov. 14, 2014: Winterkorn receives another memo that contains, among other items, information on current product defects and which refers to costs of approximately 20 million euros ($21.95 million) for the diesel issue in North America.
December 2014: VW's U.S. unit meets with CARB and offers to recalibrate the first and second generation EA 189 diesel engines as part of regular service work that was already scheduled for December 2014.
According to the lawyers' report VW recalibrates about 280,000 brand models built between 2009 and 2014 with the engine EA 189 in December 2014 and in the spring 2015.
May 2015: According to the lawyers' report VW steps up internal questioning of engineers as it seeks explanations for diverging emissions test results.
May 21, 2015: The head of product safety at VW's legal department, Cornelius Renken, was informed that irregularities with U.S. emissions tests could be caused by a problem with the engine management software, the lawyers' report says.
From late May, signs were growing at VW that illicit software may have been used in its U.S. vehicles, the report said.
June/July 2015: According to the lawyers' report VW's legal department learned that around 80,000 U.S. cars with the EA 189 engine's second generation and another 400,000 models with the first-generation EA 189 were affected by the software problem.
July 8, 2015: CARB informs VW's U.S. division and the EPA that a new set of tests has shown emissions by a U.S. Passat car are still at unacceptable levels, the report says.
July 21, 2015: The report says specialists at VW discussed a notification by CARB to withhold type approval of 2016 vehicles should VW fail to resolve its emission issues.
That meeting led to VW's Committee for Product Safety (APS) establishing a diesel task force, it said.
July 27, 2015: Some VW employees discuss the U.S. diesel problems on the sidelines of a regular meeting about damage and product issues, in the presence of Winterkorn and Herbert Diess, head of the VW brand. VW says it is still constructing details of the meeting, and establishing whether those present understood that the change in software violated U.S. regulations. VW says Winterkorn asked for further clarification of the issue.
End of August 2015: The lawyers' report said former CEO Winterkorn was informed that first- and second-generation engines EA 189 were not compliant with U.S. emissions standards and that the APS was due to meet on Aug. 24 to try to resolve queries from CARB about the EA 189's second and third generation.
VW said it was at this time that technicians gave a full explanation of technical causes for discrepancies in nitrogen oxide emissions to VW's in-house lawyers as well to U.S. attorneys from Kirkland & Ellis. A management board member - not identified by VW - realises the software changes constitute a defeat device prohibited under U.S. law.
Sept. 3, 2015: VW formally communicates information about the defeat device to CARB and the Environmental Protection Agency (EPA) during a meeting. Winterkorn is informed in a note, dated Sept. 4. Sept. 18, 2015: EPA issues a public notice of violation of the Clean Air Act to VW, alleging that model year 2009-2015 VW and Audi diesel cars with 2.0 litre engine included defeat devices.
Sources: Volkswagen statement from March 2. VW law firm Goehmann report to a German court from Feb 29.
($1 = 0.9112 euros)
(Reporting by Andreas Cremer and Victoria Bryan; Editing by Greg Mahlich)
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