The news that Volkswagen had deliberately circumvented U.S. EPA emissions laws on its so-called "clean diesel" models from 2009 to 2015 hit the automotive world like a bombshell on Friday.
Over the weekend, more news emerged, with a statement and apology from VW Group CEO Martin Winterkorn.
The company also took all remaining new 2.0-liter TDI diesel models off sale in the U.S.--and told its dealers to stop selling those models as used cars as well.
When European financial markets opened this morning, Volkswagen shares instantly lost more than a fifth of their value.
More news is likely to break over the course of this week, but here's what we know to date.
We've put it in the form of 10 questions, and then answered them based on information as of the start of business on Monday morning.
(1) Which vehicles are affected?
The cars covered by the expected recall were sold by Volkswagen and Audi between 2009 and 2015, and powered by a 2.0-liter turbocharged diesel engine.
That earned them the designation "TDI" following the model name.
The recall will also apply to the Audi A3 TDI, in two generations: both the one sold from 2009 through 2013, and the new version introduced for 2015.
But across those models there are actually two engines in three versions. The most common is the 140-hp "EA188" 2.0-liter turbodiesel four introduced for 2009.
That same engine in the Passat TDI was fitted with Selective Catalytic Reduction (SCR), also known as urea aftertreatment, starting in 2012.
Finally, a new generation of 2.0-liter diesel engine, known as EA288, is fitted to various VW vehicles (the Golf TDI, for instance) starting with the 2015 model year.
Note that Volkswagen and Audi vehicles equipped with larger TDI diesel engines are notaffected.
Those include the Audi Q5 and Q7, and the Volkswagen Touareg.
(2) What should owners of 2009-2015 Audi and Volkswagen TDI diesels with 2.0-liter four-cylinder engines do?
In the short term, nothing.
Volkswagen later expanded the statement it issued on Friday, September 18, to include the following information:
Volkswagen is committed to fixing this issue as soon as possible. We want to assure customers and owners of these models that their automobiles are safe to drive, and we are working to develop a remedy that meets emissions standards and satisfies our loyal and valued customers.
Owners of these vehicles do not need to take any action at this time.
This means that the vehicles in question will all be recalled so VW can attempt to modify them in away that would make them legal.
Until a remedy is devised, tested, approved by the EPA and CARB, and distributed to dealers, however, owners should simply keep driving their cars.
(3) What longer-term risks are there to owners?
The almost half a million owners of 2009-2015 Volkswagen and Audi 2.0-liter TDI models face some potentially significant longer-term challenges, however.
First, the value of their vehicles as used cars may well fall.
They paid more for their cars: Premiums over comparable gasoline models range from $1,000 on Golfs with mid- and high-level trims to $6,855 on top-level Passat models. While used diesels historically were worth more on the used-car market, that may not prove to be the case going forward.
Second, if VW is able to develop a fix and get it approved, the performance and fuel efficiency of their cars might fall. That's more likely if the fix is only a software update, which would be far cheaper for Volkswagen.
If VW ends up having to make software changes and retrofit an entire SCR system to the cars (other than the Passat TDI)--something that would likely cost it thousands of dollars per car--performance would likely be unchanged, but interior volume might be reduced to accommodate a liquid-urea tank and associated plumbing.
Third, and most worrisome for owners in California and some other states, they may not be able to re-sell or even re-register their TDI vehicles until they are fixed by Volkswagen.
That's because the vehicles were apparently "non-compliant," or illegal to sell in the first place as they now stand.
While it is legal to sell the car, CARB and the California Department of Motor Vehicles may not allow the buyer to register the vehicle, and current owners may not be allowed to renew their registrations, until all the emission recall work has been completed.
Some states that follow California emission standards (so-called Partial Zero Emission states) also have rules in place that require all emissions-related recalls to be completed before periodical emission testing. If the recall is not completed, the vehicle cannot pass the inspection, and the state will decline renewal of the vehicle registration.
(4) What exactly did VW do?
Volkswagen has admitted that it equipped the control software for its 2.0-liter TDI diesel vehicles with a "defeat device" that detected when the car was undergoing emissions testing and significantly changed the operations of its powertrain to reduce emissions during the tests.
That detection was likely based on a combination of sensor data from the car, which might include steering angle (since cars on dynamometer tests don't make turns), front-wheel versus rear-wheel rotation speed, and a variety of other factors.
The emission test cycles that were developed in the early 1970s are far less aggressive than virtually any real-world driving 40 years later.
It appears that a combination of the factors above plus extremely gentle acceleration and braking might alert the car that it wasn't on the road but being tested in a lab.
Diesel engines are known to generate nitrous oxides (NOx), as do gasoline engines, but in greater quantities due to their higher operating temperatures.
Based on discussions with knowledgeable sources, we surmise that once an emissions test was detected, VW got the affected TDI engines to meet the Tier 2, Bin 5 NOx limits by reducing the fuel flow rate.
This would reduce performance, but most likely not to the point where the car couldn't complete the emission cycles.
Lowering fuel flow would also reduce combustion temperatures and/or the duration of high-temperature operation enough to keep NOx emissions barely within EPA limits.
If the car detected that it was no longer in "testing mode" but had returned to "driving mode," it would restore fuel flow to the regular level--which would send NOx emissions soaring.
The odd thing is that this software feature seems to have persisted into the company's newest generation of 2.0-liter TDI diesels, a heavily revised design known as EA288, which was intended to be fitted with urea aftertreatment systems--which allow other makers to meet the NOx limits under all circumstances.
(5) How was it discovered?
This is one of the more interesting parts of the story: It wasn't discovered by the EPA at all, but by a clean-air group that tested VW diesel models to confirm its hypothesis that the latest diesel cars complied with all emissions standards while remaining much more efficient than comparable gasoline cars.
As recounted by Bloomberg, the International Council on Clean Transportation (ICCT) had studied European diesel cars and discovered that the on-road emissions of some models were notably higher than those measured in lab testing.
So the group decided to replicate its tests in the U.S., which then had much stricter emissions limits (known as Tier 2, Bin 5) than the Euro 5 standards in force in the European Union until this year.
They tested the cars on a dynamometer, or "rolling road," then measured their emissions in real-world use with a variety of speeds, road types, and demands on a road trip from San Diego to Seattle.
“We had no cause for suspicion,” John German, the ICCT's U.S. co-lead, told Bloomberg. “We thought the vehicles would be clean.”
The U.S. models too proved to have on-road emissions far higher than the maximum legal limits, so high that German termed the results "shocking."
On the open road, a Volkswagen Jetta TDI blew through the U.S. nitrogen oxide (NOx) emissions limit by 15 to 35 times. A VW Passat TDI (with urea aftertreatment) was 5 to 20 times the maximum.
A BMW X5 xDrive 35d diesel crossover equipped with urea aftertreatment and tested at the same time, however, met the emission limits under all circumstances.
The U.S. EPA and CARB opened a joint investigation into the cars in May 2014, but it was not publicized.
Last December, VW recalled nearly half a million cars for a software patch to fix the problem--but CARB found it didn't enable the cars to meet the regulations. Matters came to a head on July 8, when CARB informed the EPA and VW of its findings.
This month, the EPA refused to certify VW's 2016 TDI models for sale, based on its real-world testing of the vehicle's emissions--which exceeded the legal limits, even though its lab tests didn't.
That's when Volkswagen admitted that it had installed the "defeat" software. The EPA went public within a few weeks.
The full, formal six-page EPA letter sent Friday, September 18, is available here; it's worth reading for the details of VW's admission of guilt.
(6) Why didn't the EPA discover it before now?
The U.S. Environmental Protection Agency doesn't test every new car for emissions compliance every year. Most buyers don't know that, though, since the EPA's name is on the official ratings.
Instead, manufacturers "self-certify" and submit their data to the EPA. The agency tests about 15 percent of the new cars that go on sale each year, but it simply doesn't have the resources--in staff or in funds--to test every new car.
It's worth noting that in the wake of fuel-efficiency rating reductions by Hyundai and Kia, and then by Ford (twice), the EPA has said it will step up its verification and may require manufacturers to confirm their lab results with on-road testing.
But that's in the future. The VW trickery was discovered by a third party, which then passed it along a chain of contacts until it reached CARB and the EPA.
(We've heard through the grapevine that ICCT shared its results with a Detroit Three automaker, which was actually the tipster to the EPA, but we've not been able to verify that--so treat it as rumor until proven otherwise.)
(7) What has VW said so far about the charges?
The company issued two statements, one from its U.S. arm and one from its German headquarters.
The U.S. statement, issued and updated on Friday, said:
Volkswagen Group of America, Inc., Volkswagen AG and Audi AG received today notice from the US Environmental Protection Agency, US Department of Justice and the California Air Resources Board of an investigation related to certain emissions compliance matters. As environmental protection and sustainability are among Volkswagen's strategic corporate objectives, the company takes this matter very seriously and is cooperating with the investigation.
Volkswagen is committed to fixing this issue as soon as possible. We want to assure customers and owners of these models that their automobiles are safe to drive, and we are working to develop a remedy that meets emissions standards and satisfies our loyal and valued customers. Owners of these vehicles do not need to take any action at this time.
The German statement, issued Sunday by the CEO of Volkswagen AG, Dr. Martin Winterkorn, read:
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 do not and will not tolerate violations of any kind of our internal rules or of the law.
The trust of our customers and the public is and continues to be our most important asset. 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. This matter has first priority for me, personally, and for our entire Board of Management.
Thus far, no mention of any contact with the 480,000 owners of the affected vehicleshas been released. It may be months before details of a specific fix are available.
(8) What's been the impact on the company?
When the European financial markets opened this morning, VW Group shares lost more than 20 percent of their value. That's the best indication of how bad the damage from this could get.
The Los Angeles Times published a scathing editorial on Sunday, and more will surely follow.
The timing is bad, too: Some commentators have expressed dissatisfaction that the GM ignition-switch scandal, which killed more than 100 people, was recently resolved with a fine lower than Toyota's and no individuals held criminally culpable.
Volkswagen's CEO issued a rare weekend statement--very unlikely for a German company--that was as contrite as we've seen in years.
Over the longer term, this event could set back VW's aspirations in North America by a decade or more, just as the so-called "sudden acceleration" fiasco did for Audi in the mid-1980s.
Volkswagen has struggled for years to understand the U.S. market and launch appropriate models.
More than two decades after the SUV boom began, it remains largely car-based and its Tiguan compact crossover--the hottest market segment today--is old, too small, and expensive. A mid-sized SUV concept, the CrossBlue, remains in the future more than three years after it was first shown.
And diesels were one of VW's few distinguishing points. They made up 22 percent of its sales last year, and 23 percent of its August sales.
The restrictions on new diesel car sales (see below) will surely slash its U.S. sales even before customers for non-diesel vehicles turn away owing to the perception of corporate malfeasance.
In short, VW is facing severe and painful challenges in the U.S. market for many years to come, not to mention a recall for half a million cars that could prove breathtakingly expensive if a suitable fix can't be accomplished in software.
The class-action suits have already been filed.
And that's even before the potential fine of $18 billion--a maximum of $37,500 for each non-compliant car sold--which represents more than VW Group's entire 2014 global profit of $14.25 billion.
(9) Can you still buy a new Volkswagen or Audi with one of these engines?
No. Over the weekend, VW issued a "stop-sale order" on all remaining new 2014 and 2015 TDI models with 2.0-liter diesels on its dealer's lots.
VW also told its dealers not to sell any of the affected vehicles as used cars.
Those cars will remain in limbo until the details of a recall are announced and approved.
(10) What does this all mean--for owners, for Volkswagen, and for diesel cars in North America?
In our view, this will not end well.
The deliberate attempt by VW to deceive regulators, flout emissions rules, and sell cars it knew to be illegal will hurt TDI owners, the company itself, and very likely the prospects for diesel passenger vehicles in the U.S. market.
Unlike the GM ignition-switch case and the Toyota acceleration case, this involves a company that set out deliberately to circumvent regulations and did so successfully for eight years.
And it's not as if the cars were slightly out of compliance: At one point, one model emitted 35 times the permissible limit of highly-harmful nitrous oxides (NOx).
We suspect the EPA will want to put Volkswagen's rotting head on a pike on the walls of the town, to discourage the blatant, flagrant arrogance that the company appears to have displayed.
And over the weekend, two friends of this site have already contacted us for advice about car-buying.
We think that's only the beginning.