Volkswagen's emissions 'cheat' software scandal: an explainer

Published: 25 November 2015

► Ulrich Hackenberg steps down
► All the latest news on VW emissions crisis
► VW sales drop 10% in October in UK

The dieselgate crisis has claimed another high-profile scalp, as Ulrich Hackenberg has stepped down as a member of the board of management for technical development by mutual consent. An engineering heavyweight with a 30-year career within the VW Group, Hackenberg has been largely credited as the driving force behind the lucrative platform sharing strategies, in particular the ‘MQB’ modular architecture that underpins crucial volume models across VW, Audi, Skoda and Seat.

His departure comes as Volkswagen continues to announce technical changes that will be made to the EA189 1.6 and 2.0-litre diesel engines at the centre of the emissions scandal, to be implemented from January 2016. For full details, click here. 

VW sales drop 20% in November in UK

It's been a grim few months for Volkswagen, which saw sales plunge by 20% in November 2015, according to Society of Motor Manufacturers and Traders (SMMT) figures. The fall came as other car makers celebrated a rise in a growing market.

Volkswagen has became embroiled in a fresh raft of emissions 'defeat device' allegations, with the US Environmental Protection Agency alleging that 3.0-litre diesel engines in a variety of current VW, Audi and Porsche are fitted with software capping their nitrogen oxide (NOx) emissions during testing but allowing levels up to nine times greater during ordinary driving. What's more, VW has also admitted it has uncovered 'irregularities' in how it has measured CO2 levels in around 800,000 VWs, Audis, Skodas and Seats in Europe, a development which could cost the company a further €2 billion (£1.4bn) to rectify. Click here for the full details.

Read on for the #dieselgate scandal in its entirety, with continual updates as they happen. 

Reporters gather at VW HQ in Wolfsburg (Getty)

EA288 EU5 and EU6 engines declared defeat device free

Volkswagen has issued a statement declaring EU5 and EU6 versions of the EA288 engine family free from 'improper defeat device' software ‘as defined in law’. This means that VW believes these engines, including those used by Audi, Seat and Skoda, comply with European legislation regarding emissions. However, VW has also confirmed that it is still investigating whether variants of these engines sold outside the European Union conform to other regional emissions requirements.

The EA288 engine family is an evolution of the older EA189 engine family at the centre of the VW ‘dieselgate’ emissions scandal. Work continues on technical solutions to vehicles affected by the controversy, and Volkswagen has reiterated that the necessary corrective measures will begin rolling out in January 2016 – though exact technical details remain unclear.

VW will now fast-track new clean tech

The former chief of Skoda, Winfried Vahland who was poised to run Volkswagen USA, has quit the VW group because of 'differing views on the organisation of the new group region' in a planned shake-up of how the car making giant is structured. It's just one of a series of developments in the VW emissions scandal, as the company cuts €1 billion a year from its R&D budget.

German authorities have now ordered the car maker to recall 2.4 million cars to fix the defective software in affected cars, rather than do it in a voluntary fashion (as has been mooted in the UK). And, separately, Italian police have raided VW offices in Verona and Lamborghini HQ in Bologna searching for any evidence of commercial fraud, according to Italian media reports.

And it's becoming clearer what effect the new austerity era in Wolfsburg will have: VW has pledged that the next-generation Phaeton will switch to become an electric limousine, it's fast-tracking hyper-clean diesel technology and it will develop a new scalable electric architecture dubbed MEB to underpin a new generation of EVs with projected ranges of between 150-300 miles.

The VW emissions crisis in the UK

The UK boss of Volkswagen, Paul Willis (below), has been hauled in front of MPs and admitted that 400,000 British cars will need physical engine modifications to remedy the 'defeat device' emissions cheat software. The company has already warned that the fix won't get underway until January 2016, and it could take another year before all cars are sorted.

Paul Willis grilled: the UK boss of Volkswagen hauled before MPs

Willis was called to appear in front of the transport select committee to explain how VW is planning to restore motorists' faith in the company's cars. He admitted that a third of cars affected in the UK would require a change to the fuel injection system - mostly the 1.6 TDI models sold since 2008. It's a further blow to VW, and confirmation that it's not just a simple software upgrade. Click here to find out if your Volkswagen is affected.

It has transpired that around 3 million of the 11m cars identified globally could require physical hardware upgrades, as well as a software reflash.

'Painful cuts ahead'

Back on the global stage, the newly appointed boss of Volkswagen has warned staff in Wolfsburg that 'painful' cuts are on the way, as the car-making giant tightens it belts to ride out the storm of the diesel emissions scandal. The all-electric successor to the Phaeton has been delayed and the €100m design HQ in Wolfsburg has been canned.

CEO Matthias Mueller told 20,000 staff gathered in production hall 11 at the German HQ: 'It is not possible to quantify the commercial and financial implications at present. That is why we have initiated a further critical review of all planned investments. Anything that is not absolutely necessary will be cancelled or postponed... To be perfectly frank: this will not be a painless process.'

Casualties will include all non-core spending, and it is likely that nice-to-haves such as sponsorships, motorsport and even niche new model programmes (Bugatti Chiron hypercar, anyone?) could be cut or put on hold. Mueller stressed that the company was doing all it could to fix the emissions crisis and said that production remained in full swing, as current-generation EU6 diesels are unaffected.

VW has also appointed a new boss of the supervisory board; former finance chief Hans Dieter Poetsch was voted in as the new chairman at an emergency board meeting on Wednesday 7 October. 

New VW chief exec Matthias Mueller (Getty Images)

UK sales figures published on Tuesday 6 October suggest that Volkswagen escaped any downturn in sales in September, traditionally the busiest month for new-car registrations. VW sales were up nearly 4% and overall British sales of diesels also rose by a similar amount. It will be interesting to see if those gains continue in October, as the full scale of VW's problems becomes apparent.

VW emissions scandal: the UK owners' perspective

The Government has confirmed that UK tax rates won't change on Volkswagen, Audi, Skoda and Seat models affected by the emissions scandal - even if the remedial software fix due in October 2015 adversely affects the cars' CO2 ratings. The news comes as comfort to owners worried their VED and company car tax would rise if tweaked ECUs raised carbon dioxide emissions.

The VW group has announced 1.2 million British cars are affected by the #dieselgate scandal and it is rapidly working on a fix for the EA189 diesel engine family; the company is sourcing ownership details from the DVLA and will write to all affected owners. The UK is more exposed than any other country apart from Germany, which has 2.8m cars needing remedial action.

Volkswagen has already suspended the sale of 4000 cars in the UK, all using the EU5 emissions-standard motor. It continues to sell models with the later EU6 compliant engine, which does not use the so-called 'defeat device' cheat software uncovered in the US.

The full list of affected cars is now public

Audi admitted 2.1 million of its cars ran the 'defeat device' in engines' ECUs, Skoda has 1.2m cars, Seat 700,000, there are 1.8m VW vans - plus the 5m VW cars originally identified. Glass's Guide pricing experts reveal a drop in used VW residual values of up to 3% here, as buyers worry over the iffy software used to bypass diesel emissions tests in the US. 

Poll: will scandal affect VW loyalty?

What will happen to my Volkswagen?

Officials are keen to stress this is a service action to 'refit' cars, not a full recall. It's a technicality, but full-blown recalls are reserved in the UK for safety-related issues. VW will write to affected owners and offer a retro-fit upgrade to their diesel car. Owners will take their car to a main dealer and VW will upgrade the ECU to eliminate the problem software free of charge, it claims. But the CEO has now confirmed that some cars will need additional physical engineering changes as well as a software reflash.

Models affected include all Golf Mk6, Passat Mk7, Tiguan Mk1 diesels, which are 'equipped exclusively with type EA189 diesel engines.' Audis affected are some A1, A3, A4, A5, A6, TT, Q3 and Q5 models, it has been confirmed. Skoda and Seat have yet to reveal a full model breakdown, but it is likely to be similar models based on the group MQB architecture.

From Porsche to top VW group job: Matthias Mueller

The new group boss of Volkswagen certainly has his hands full. Wolfsburg announced sweeping boardroom changes on Friday 25 September: Porsche leader Matthias Mueller (above) is the new CEO of Volkswagen AG and has pledged that his first priority is to clean up the company with a major restructure, new personnel and emergency actions to restore faith among the 80 million Volkswagen owners worldwide.

Dr Herbert Diess, CEO of the VW car division, said: 'We are working at full speed on a technical solution that we will present to partners, to our customers and to the public as swiftly as possible. Our aim is to inform our customers as quickly as possible, so that their vehicles comply fully with regulations. I assure you that Volkswagen will do everything humanly possible to win back the trust of our customers, the dealerships and the public.'

The story so far

VW has been embroiled in a storm after US emissions bodies discovered 2.0-litre diesel engines used a hidden special 'cheat cycle' when placed on a laboratory testbed (the cars can tell because the front wheels are spinning on a dynometer while the rears are stationary).

A simple recall story in the US has rapidly escalated into a full-blown global scandal, with American authorities threatening a robust $18 billion fine, VW shares plummeting by a third, Switzerland banning sales of affected diesels (and Italian VW Group dealers following suit, with an eye on potential recall costs) and Wolfsburg hastily committing to the recall of nearly half a million vehicles in the US, and probably more elsewhere in the world. This is a fast-moving story and the latest developments are:

  • Volkswagen cans its new €100m design HQ in Wolfsburg
  • VW sales drop 10% in UK in October 2015
  • Focus switches to CO2 manipulation
  • 3.0-litre V6 TDI now included in software scandal
  • Former finance boss Hans Dieter Poetsch voted as new VW chairman
  • VW confirms all non-essential spending will be cut or suspended
  • Government confirms no change to UK car tax if CO2 rises in fix
  • Interbrand says VW has dropped 9% in its Best Global Brands report 2015
  • UK has 1.2 million affected cars
  • Glass's Guide reveals 3% drop in residual value on VW diesels
  • Scandal continues to batter VW's share price - down 35% in one week
  • Audi admits 2.1 million of its cars used the 'cheat-mode' software
  • 700,000 Seats included, 1.2m Skodas, 1.8m VW vans
  • VW says 5 million of its cars worldwide use the EA189 diesel engine
  • EU5 engines only affected; EU6 diesels do not use 'defeat mode'
  • 'Some employees suspended', unclear which roles have been affected
  • Porsche chief Matthias Mueller appointed new CEO of Volkswagen AG
  • Reuters reports German prosecutors are investigating ex-CEO Martin Winterkorn
  • Group restructured into four divisions: volume, premium, sports, CVs
  • 'Deluge' of UK Volkswagen owners complaining - newspaper reports
  • BMW shares weaken, despite claims its diesel engines are compliant
  • CEO Martin Winterkorn resigns on Wednesday 23 September
  • See the earlier video statement by Winterkorn here
  • Criminal probe by US Department of Justice likely 
  • More than €13 billion wiped from VW's market value
  • VW sets aside €6.5 billion to fix the #dieselgate scandal
  • Porsche SE, which owns 32% of VW, says it'll impact its results too
  • Engine affected is 2.0-litre TDI Type EA189 in 11m cars worldwide
  • US boss Michael Horn: 'We totally screwed up'
  • The FT: 'Car industry faces Libor moment'

Out: Martin Winterkorn's resignation speech in full

Martin Winterkorn's resignation statement in full

The boss resigned on Wednesday 23 September 2015. He issued this statement: 'I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group. As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part. Volkswagen needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation. I have always been driven by my desire to serve this company, especially our customers and employees. Volkswagen has been, is and will always be my life. The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.'

A recap: what is VW accused of?

The US Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) found a 'defeat device' embedded in the engine management systems on the modern Volkswagen 2.0-litre diesel engine described as EA189, designed to lower exhaust levels of certain pollutants such as nitrogen oxides (NOx) substantially if the car was being emissions tested. When released back to the road, the engine would then pump out normal, higher levels - in tests the EPA found that NOx was 40 times higher when running in normal mode. VW admits 'while testing diesel cars of the Volkswagen Group they have detected manipulations that violate American environmental standards.' Volkswagen has now admitted the 'dual-mode software map' on affected diesel engines.

What does the EPA say?

'Put simply, these cars contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test,' said Cynthia Giles, an EPA enforcement officer. 'We intend to hold Volkswagen responsible. VW was concealing the facts from the EPA, the state of California and from consumers. We expected better from VW. Using a defeat device in cars to evade clean air standards is illegal and a threat to public health.'

VW has spent years building up the reputation of its diesels in the US

What could happen to Volkswagen now?

The US authorities have the power to levy a fine as high as $37,500 per vehicle affected. Yes, that means a total of $18 billion - in theory. It is thought to be unlikely that the lawyers will be quite as exteme, however, since VW is a smaller player in the States (just 13% of all VW cars sold were in the US in 2014). But make no mistake: this is a serious setback in Wolfsburg's drive for global domination (in 2015 it became the world's biggest car making group in the first half) and the scandal now looks set to derail that success. It has already spelled the end of CEO Martin Winterkorn's leadership in Wolfsburg; his contract was up for renewal this month, and more heads will be likely to roll as independent and external investigations get under way...

Is VW having to recall the cars?

Oh yes. So far VW - and Audi, it should be pointed out - have agreed to recall 482,000 four-cylinder Jettas, Beetles, Golfs, Passats and A3s sold since 2008. It must remove the 'defeat device' and clean up the NOx emissions on all the affected cars in the US. That is a seriously expensive recall - never mind the questions whether the same software was fitted to group vehicles sold elsewhere in the world. Volkswagen has subsequently admitted that there are around 11 million products using the 2.0-litre TDI engine globally. And word is that the company may be facing class legal action from US consumers. We sense this is only the tip of the iceberg...

Analysts' reaction

Respected industry watcher Max Warburton of Bernstein Research says the scandal is a major setback for VW: 'The commencement of legal proceedings against VW by the US EPA is profoundly serious,' he said. 'This is not your usual recall issue, an error in calibration or even a serious safety flaw. All of the former can be attributed to bad luck or bad execution - OEMs can normally claim they were trying their best, but fell short. This is quite different - the accusation is that VW deliberately set out to mislead regulators with a cleverly hidden piece of software.'

Prof Christian Stadler, of Warwick Business School added: 'No question that this is a big problem for Volkswagen... From 2009 to 2011 Toyota recalled nine million cars for issues leading to unintended acceleration. Estimations suggest that Toyota dealers lost more than $2 billion as a result and the company itself also around $2 billion. Toyota also settled with the government for $1.2 billion. To some extent the cheating by Volkswagen seems more blatant, but the numbers are lower and there are no fatalities involved. This suggests that in the "heat of the moment" the long-term effect on Volkswagen may be overstated. Sure it will hurt, but maybe not quite as bad as we expect right now.'

TDI: three letters that may yet haunt Volkswagen

What does Volkswagen say in its defence?

Over to Martin Winterkorn, the former chief executive of Volkswagen AG. On Monday, when still running the company, he said: 'The Board of Management at Volkswagen AG takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case.Volkswagen has ordered an external investigation of this matter... We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused.'

The law that VW is deemed to have broken

This is all about section 203 (a) (3) (B) of the Clean Air Act. And we quote: car makers 'are subject to a civil penalty of up to $3750 for each violation that occurred on or after 13 January 2009. In addition, any manufacturer who, on or after 13 January 2009, sold... any new motor vehicle that was not covered by an EPA-issued COC is subject, among other things, to a civil penalty of up to $37,500 for each violation.' This is where the $18bn fine threat comes from.

How VW was rumbled

There is a back story here, starting in May 2014 when a study in West Virginia University found conflicting emissions results on a 2012 Jetta and 2013 Passat diesel. They alerted the CARB and EPA - leading to the current scandal. And we fear this one has a long way to run...

By Tim Pollard

Digital editor-in-chief and motoring news magnet

  • Volkswagens: a massive recall in the US
  • Wolfsburg is in meltdown over the engine scandal
  • VWs: an electric future
  • A grilling: Paul Willis, MD of Volkswagen UK, is being called in front of UK transport select committee
  • 'Painful' cuts ahead: VW's Wolfsburg factory (Getty)
  • New VW chief Matthias Mueller (Getty Images)
  • VW UK is contacting owners for remedial work in October 2015
  • New Volkswagen AG chief exec Matthias Mueller warns that VW spending must be reined in
  • Eleven million VWs, Audis, Seats and Skodas are affected worldwide
  • Audi is now embroiled in the VW Group emissions scandal
  • A VW 2.0 TDI engine, feeling sorry for itself yesterday
  • Camera crews gather outside VW HQ in Wolfsburg (Bloomberg)
  • Martin Winterkorn resigns from VW
  • Volkswagen's ex-CEO: Martin Winterkorn tendered his resignation today
  • Seat has 700,000 cars affected by the cheat software in its diesels
  • A US-spec Passat and CEO Martin Winterkorn