The EPA announced that 75,000 additional Volkswagen, Audi and Porsche vehicles equipped with the 3.0-liter diesel engine contain defeat devices, Automotive News reports. The agency revised the number of vehicles believed to possess emissions-cheating software from 10,000 to approximately 85,000 vehicles, bringing the total number of vehicles said to produce higher-than-advertied emissions levels in the U.S. to about 567,000.

Just three weeks ago the EPA had issued a Notice of Violation (NOV) that named the A6 Quattro, A7 Quattro, A8 and A8L sedans, the Q5 crossover as well as the Porsche Cayenne Diesel and the Volkswagen Touareg as possessing defeat devices, believed to be similar to those used in the EA 189 TDI engine in a number of previously-named Volkswagen models. Days after the Nov 2. notice, Volkswagen, Audi and Porsche issued a stop-sale order on those models stretching from used examples from the 2013 model year through the 2016 model year, but disputed the EPA's claims at the time.

Volkswagen AG now admits the emissions issue concerns the models named by the EPA, indicating that models from the 2009 through the 2016 model years are affected. The news comes after Audi of America launched a "goodwill package" program for owners of the diesel Audi A3, which uses the 2.0-liter TDI engine shared with VW models, though did not extend the program to owners of the V6 TDI models.

WASHINGTON -- The chief of the California Air Resources Board says Volkswagen “likely” will buy back at least some of the roughly 325,000 VW vehicles using the first generation of its 2.0-liter diesel with emissions-masking software.

In a question-and-answer interview with German business newspaper Handelsblatt, CARB Chairman Mary Nichols says the agency expects that vehicles with the first generation of VW’s 2.0-liter diesel engine will require a hardware “retrofit” to bring their emissions into compliance. The trouble is, Nichols said, such retrofits have struggled to achieve their intended goals in the past.

“We have seen in the past that retrofit devices just don’t work as well as they are intended to, even if it is being done by the original manufacturer,” Nichols told Handelsblatt. “So I think it is quite likely that they will end up buying back at least some portion of the fleet from the current owners.”

Nichols’ statements, made before reviewing VW’s fix proposal that it must submit to CARB today, marks the first time a regulator has said vehicle buybacks may be a necessary part of VW’s plan to fix its roughly 482,000 noncompliant diesels.

A Volkswagen spokeswoman said the automaker plans to submit its fix proposal to the EPA and CARB but declined to discuss specifics.

Nichols told the German business paper that the agency has 20 business days to review the proposal.

“Meanwhile there will be continuing investigations to determine the scope and extent of the problem that will relate to penalty decision and any other legal actions that might be taken,” Nichols told Handelsblatt.

VW has said about 325,000 of the noncompliant vehicles are powered by the first generation of VW’s 2.0-liter diesel engine, which uses a lean NOx trap to clean up smog-forming nitrogen oxide emissions. The second- and third-generation diesels use selective catalytic reduction exhaust aftertreatment systems and will need more modest fixes.

Nichols told Handelsblatt that the second-generation engine, used on about 90,000 Passats from the 2012-14 model years, may require software and hardware changes. The third-generation 2.0-liter diesels, used on about 67,000 VWs from the 2015 model year and later, can produce compliant emissions with a software change alone.

BERLIN (Reuters) -- Volkswagen will probably incur much lower costs than expected for recalling 2.4 million diesel-powered cars in Germany fitted with illegal emissions-control software, a German business magazine.

The technical fixes for 1.6-liter diesel engines require installing a 10-euro ($10.74) sensor inside the air filter and a software update, Wirtschaftswoche reported on Thursday. The magazine did not cite a source for its information.

A simple hardware solution could reduce total recall costs for the 11 million affected vehicles worldwide by 3 billion euros and enable VW to fix the cars more rapidly, Arndt Ellinghorst, of banking advisory firm Evercore ISI, said in a note sent to reporters.

"This would be a major relief for the company, its customers and shareholders," said Ellinghorst.

VW declined comment on the article, but said it is aiming to come up with the "best technical solution" for customers as its talks with Germany's KBA motor transport authority remain under way.

VW has admitted that up to 11 million cars sold globally by its VW, Audi, Skoda, Seat and VW commercial vehicles brands have software that can fool official tests for harmful NOx emissions.

VW is preparing to recall about 8.5 million of the affected cars in Europe. Most engines, which range from 1.2-liters to 2.0-liters in capacity, may only require a software update.

WASHINGTON -- Audi AG said today that it will revise emissions control software used on more than 85,000 Volkswagen Group vehicles with 3.0-liter diesel engines that U.S regulators said earlier this month violated U.S. clean air laws.

Audi will submit new applications for U.S. government emission certification for the revised software, the VW luxury brand said in a statement. Once approved by EPA and California’s Air Resources Board, Audi will make the software available to be installed in the vehicles, the company said.

The VW Group also extended its U.S. market stop-sale on new models powered 3.0-liter diesel vehicles “until further notice.”

The plan indicates that the 85,000 or more Audi, Porsche and VW vehicles powered by 3.0-liter diesels can be made compliant with a software alone, allowing the automaker to avoid the type of costly hardware retrofits expected to be needed to remedy its nearly 500,000 2.0-liter diesels with illegal “defeat device” software.

Audi said its plans to “revise, document in detail, and resubmit for U.S. approval certain parameters” of its 3.0-liter diesel emissions software following a meeting last week between Audi executives and officials from the EPA and CARB about the issue.

Failure to disclose

In its statement today, Audi said that it failed to disclose three emissions control software functions, known as auxiliary emissions control devices, to the agencies as required by U.S. law.

“That will now be done with the updated software and the documentation,” Audi said in its statement.

One of the AECDs is “regarded as a defeat device” according to U.S. law, Audi said.

The software recognizes when vehicles are undergoing a U.S. emissions test and in turn activate a “temperature conditioning” mode that turns on pollution-control equipment, limiting nitrogen oxide emissions to permissible levels, according to the EPA.

In real-world driving, the controls are inactive, making the vehicles pollute far more than they were certified to be, according to the EPA.

An EPA spokeswoman said the agency and CARB’s investigation into VW’s emissions issues continues.

“The agencies continue to insist that VW and Audi develop effective, appropriate remedies as expeditiously as possible, and at no cost to owners,” the spokeswoman said.

More penalties?

The 3.0-liter diesel engine was developed by Audi and used in diesel variants of the A6, A7, A8, Q5 and Q7 starting in the 2009 model year. The engine was also used in the VW Touareg and Porsche Cayenne SUVs since model year 2013, Audi said.

The VW Group may still may face U.S. penalties for failing to disclose the AECDs, which first appeared on its 3.0-liter diesels in the 2009 model year.

"Determinations regarding potential penalties and other remedies will be assessed as part of the investigation EPA has opened in conjunction with the U.S. Department of Justice,” the EPA spokeswoman said in a statement.

HAMBURG (Reuters) - German prosecutors have launched an investigation into suspected tax evasion in connection with cheating on emissions tests by Volkswagen , adding to the intense scrutiny of Europe's biggest carmaker.

The investigation focuses on five Volkswagen employees, a spokesman for the prosecutor's office in the northern German city of Braunschweig, near Volkswagen's Wolfsburg headquarters, said on Tuesday, confirming an earlier media report.

As is customary in Germany he did not name any of the suspects.

Volkswagen admitted in September that it installed software in up to 11 million diesel vehicles worldwide that vastly understated their actual emissions of smog-causing nitrogen oxides, causing the biggest business scandal in Volkswagen's 78-year history.

Earlier this month it said it had also understated carbon dioxide emissions, and thereby also the fuel consumption, of 800,000 cars sold in Europe.

As Germany's car tax is rated according to a vehicle's fuel consumption, the prosecution is now looking into whether owners of the affected Volkswagen vehicles underpaid on taxes, a matter which the prosecution's spokesman said was "not small".

The main focus of the investigation is tax evasion, but it could also involve fraud, he said.

This investigation will run alongside an ongoing separate probe, in which Braunschweig's prosecution is investigating several people connected with Volkswagen on suspicion of criminal offences like fraud or violation of competition rules.

WASHINGTON -- The California Air Resources Board today ordered Audi, Porsche and Volkswagen to recall and repair “illegal” emissions software in more than 15,000 vehicles with 3.0-liter diesel engines sold in the state since 2009, the regulator said in a statement.

The order was prompted by Audi’s admission this week that its 3.0-liter diesels sold since the 2009 model year contained three “auxiliary emissions control devices” that regulate emissions performance that weren’t properly disclosed to regulators. One of the three was deemed by regulators to be an illegal “defeat device” designed to fool emissions testers.

The 3.0-liter recall order covers between 15,000 and 16,000 vehicles sold in California from the 2009-15 model years, out of around 85,000 sold nationwide.

CARB’s order starts the clock on the second U.S. recall to stem from Volkswagen’s emissions scandal. The VW Group has 45 business days to draft and submit its 3.0-liter diesel recall plan to CARB.

Last Friday, VW submitted to U.S. regulators a recall plan for 482,000 vehicles with 2.0-liter diesel engines containing software that VW admitted installing to skirt U.S. emissions tests.

Audi appeared already to be moving towards a recall for the 3.0-liter models. On Monday, the luxury brand said in a statement that it would revise the software in question and submit new applications for U.S. government emission certification. Once approved, it would provide the updated software to owners.

A spokesperson for Audi said the CARB filing was expected and part of the agency's notification process. The timeframe was expected as well.

"We fully intend to work on solutions to present to regulators within this window of time," the spokesperson said in an e-mail. "We take this very seriously and will treat responses to the agencies as a solemn responsibility."

Porsche, through a spokesperson, said the company will "continue its efforts to comply fully with all regulatory authorities."

"Porsche awaits detailed information from the engine supplier, Audi AG, as to the specific actions which will be necessary to correct and recertify the 3.0L V6 diesel engine."

Two months into its diesel scandal, Volkswagen says it finally has found a silver-bullet solution.

In receiving the blessing of the KBA, Germany's type approval authority, to clean up hazardous emissions from the 1.6-liter diesel, VW has now resolved the hardest aspect of its massive recall as that specific engine required technical modifications.

Not only does the proposed new component bring the cars into compliance in Europe, VW Group believes the fix will not even impede fuel efficiency or engine output.

Fitted directly in front of the air mass sensor, this part is equipped with a mesh that calms the swirled air flow and thus decisively improves accuracy when measuring current air mass throughput, a very important parameter for optimum combustion. That last passage is taken almost word for word from the company's statement.

Pretty darn impressive even if I have absolutely no clue what that means.

The component comes complete with a cool name, too – “flow transformer." It sounds kind of like the fictional Flux Capacitor that allowed a DeLorean to travel through time in the 1980s film "Back to the Future."

VW even put quotes around the name, as I just did, as if they patented the whole idea in the first place. In German it's even better since you can squish the two words together to form Stroemungstransformator.

All I can say is, "Wow!"

So imagine my surprise after watching the company's helpful accompanying video on its website (see below). When a bookish-looking VW manager complete with a properly long job title -- head of diesel development of derivatives and fuel injections systems -- explained the merits of said device as he held it up to the camera for all to see, I was stunned.

Here is a German engineer who can probably plot the torque and horsepower curves of his engines from memory cradling in both hands a plastic tube as if were pure gold.

Low-tech doesn't even begin to describe a part that looks more like something a plumber might install in a kitchen sink to keep it from clogging.

Granted, the media had already reported that VW was working on a low-cost solution, but these days something as comparatively complex as DRAM memory chips manufactured under the most stringent cleanroom conditions can cost only a few dollars each.

VW still doesn’t have an answer for its U.S. diesels, but can you imagine then how the less-trusting Environmental Protection Agency might react had it, and not the KBA, been confronted with VW's Flux Capacitor? Sorry … “flow transformer."

Of course just because it looks cheap doesn’t mean it won’t work. -- I have to assume it does. Volkswagen cannot possibly be dumb enough to announce a fix that doesn't work. They know that environmental advocacy and consumer rights groups won't take them at their word, preferring instead to carry out their own tests to verify the authenticity of VW's claim.

There’s no reason a fix should be ludicrously expensive either, but at least retrofitting all engines with completely different injection nozzles as VW Group CEO Matthias Mueller had initially warned might lead one to understand why engineers were not forming lines to be the bearer of bad news.

Given that, the implication of the fix is truly staggering.

For most of the 8.5 million illegal diesels on European roads, all Volkswagen had to do to ensure it was not breaking the law, polluting the environment or deceiving customers was simply update their software?

And for the rest – the 1.6-liter versions that required technical modifications –- a quick run to their local do-it-yourself chain to pick up a plastic drain trap would have sufficed? Total service time required according to VW: less than one hour, if that. It's almost surreal.

The whole scandal is beginning to sound more and more like a very, very expensive exercise in tragicomedy.

BERLIN (Reuters) -- Audi appointed a new chairman and a new development chief as Volkswagen's flagship luxury division struggles to recover from an emissions scandal.

Audi admitted two weeks ago that its 3.0 liter V-6 diesel engine was fitted with emissions-control software, an illegal practice in the United States where the scandal has already engulfed its corporate parent VW and the mass-market VW brand.

Audi's supervisory board on Thursday appointed VW's new CEO, Matthias Mueller, as chairman, replacing long-time VW CEO Martin Winterkorn, who vacated the post in November in the wake of the scandal that also forced him out as VW group CEO.

The board also tapped Stephan Knirsch, head of engine development at Audi, to succeed Ulrich Hackenberg, the top engineer at Audi and the VW group. Hackenberg was suspended two months ago together with two other executives closely associated with the development of the VW engine at the center of the scandal, codenamed EA 189.

"The investigation is making progress," Audi deputy chairman Berthold Huber said. "That is a necessary and good sign."

U.S. law firm Jones Day, which has been leading external investigations of the scandal at Wolfsburg-based VW, has been tasked to clear up the manipulations at Audi, the works council said in a statement.

The V-6 diesel engine was designed and assembled by Audi at its Neckarsulm factory in Germany, and used in about 85,000 premium models sold by the VW, Audi and Porsche brands in model years 2009-16.

The admission from Audi, which contributes about 40 percent to VW group profit, has raised the pressure on CEO Rupert Stadler, a 25-year VW group veteran who has led the Ingolstadt-based automaker for nine years.

After being questioned by the Audi board on Thursday, Stadler will also need to convince VW's 20-member controlling panel at a meeting on Dec. 9 to discuss the state of investigations. VW plans to publish intermediate results of its probe into the scandal next week.

"We pushed for action in the interest of workers and that's exactly what's happening now," Audi labor boss Peter Mosch, a member of the supervisory board said. "Further consequences need to be drawn now to ensure that this won't happen again."Volkswagen's suspended top engineer, Ulrich Hackenberg, has left the German group after 30 years, luxury-car division Audi said on Thursday, as VW pushes ahead with the search for culprits in its diesel emissions scandal.

Not so long ago, dual-clutch transmissions -- with their superior fuel economy and lightning-quick gear shifts -- were widely viewed as the Next Big Thing. Automakers were counting on those gearboxes to improve fuel economy ratings 6 to 10 percent without compromising performance.

Not anymore.

After Volkswagen introduced dual- clutch transmissions in 2003, several mass-market automakers followed suit, only to encounter quality bugs and consumer complaints. Ford Motor Co. and Honda Motor Co. suffered a spate of complaints after introducing dual- clutch transmissions in the Ford Focus, Ford Fiesta and Acura TLX. And Fiat Chrysler -- which once planned to produce 700,000 dual- shift gearboxes a year in the U.S. -- has dropped it from its long-term plans for North America.

Consumer Reports and J.D. Power have both reported a sharp uptick in complaints about faulty transmissions, as automakers seeking better fuel economy rolled out dual-clutch gearboxes, continuously variable transmissions and eight- and nine-speed transmissions.

"In the past, transmissions were things you could count on, but that's no longer true," said Jake Fisher, Consumer Reports' director of auto testing. "We are seeing major problems that will leave people stranded on the side of the road."

Dual-clutch transmissions are twin gearboxes linked by a pair of clutches. One gearbox handles the first, third and fifth gears, while the other covers the second, fourth and sixth gears. With one clutch for odd-numbered gears and the other for even-numbered gears, the transmission can pre-select the next gear the driver is likely to shift into. That allows quicker gear shifts than manual transmissions. And since the dual-clutch gearbox does not require a torque converter, it's more efficient than an automatic transmission.

Supercar makers McLaren, Lamborghini, Ferrari and Porsche all adopted dual- clutch gearboxes, whose rapid shifts rendered manual transmissions obsolete. And in 2003, the Volkswagen Golf was the first mass-market model to feature a dual clutch transmission.

After Volkswagen rolled out the "direct shift gearbox" for its namesake brand and Audi, the technology appeared ready for the mass market. In 2007, Chrysler announced plans to build a $530 million plant in Indiana that would produce up to 700,000 Getrag AG transmissions a year. One year later, Ford announced plans to build a $500 million transmission plant in Irapuato, Mexico, in a joint venture with Getrag. In 2010, the plant began churning out dual-clutch transmissions for the Ford Focus and Fiesta.

But Chrysler and Ford both ran into trouble. In 2008, Chrysler pulled out of its joint venture with Getrag after it rejected the supplier's financing terms for the plant's tooling. That same year, the joint venture filed for Chapter 11 bankruptcy.

Currently, just three FCA models -- the Dodge Dart, Fiat 500L and the Alfa Romeo 4C -- feature dual-clutch transmissions made by Fiat in Italy. And the company's powertrain strategy unveiled last May identified dual- clutch gearboxes as a promising technology in Asia -- but not North America. In the U.S., FCA is betting on eight- and nine-speed automatic transmissions, said Jeff Lux, FCA's North American vice president of transmission powertrains.

Conventional transmissions "continue to evolve in efficiency," Lux said, "so there isn't much eagerness [at Fiat Chrysler] to make trade-offs between driveability and better fuel economy." Performance brands such as Ferrari and Alfa Romeo will continue to use dual-clutch gearboxes, Lux said, but there isn't much appetite for their use in mass-market models.

Stuck in neutral

Though growing, use of dual-clutch transmissions in the U.S. is below expectations.



2012 2014 2016 2018 2020

Automatic 11,619,846 11,884,855 12,271,737 12,277,648 11,361,358

CVT 1,231,831 2,369,040 2,943,528 2,875,029 3,070,635

Dual clutch 457,176 324,986 698,814 846,894 884,938

Manual 767,694 1,245,864 884,882 841,349 847,155


Source: Sales and projections from IHS Automotive


Ford's problems

Meanwhile, Ford introduced dual-clutch gearboxes in the 2011 Ford Fiesta, followed by the Focus. But car owner complaints quickly piled up. The transmission worked well at highway speeds, but lurched or stalled in city driving, disgruntled owners said.

On Jan. 1, 2011, Ford issued a technical service bulletin to dealers that noted the Fiesta's PowerShift transmission could suffer "a loss of power, hesitation, surge, or lack of throttle response while driving." The automaker issued a variety of fixes, including both software and hardware. As recently as February, Ford issued a "customer satisfaction program" to repair the transmission control module.

And now the issue is getting hashed out in court. In 2012, the Los Angeles-based law firm Capstone Partners APC filed the first of three lawsuits in a U.S. district court on behalf of owners who claim their vehicles suffered repeated breakdowns. The firm's lawsuits in the Central District of California seek class-action status.

Contacted last week, Capstone attorney Tarek Zohdy declined to indicate how many plaintiffs were expected to join the lawsuit. Ford spokesman Paul Seredynski also declined comment.

But judging by complaints to the National Highway Traffic Safety Administration, it seems possible that the number of plaintiffs could run into the hundreds or even thousands. Over the past four years or so, NHTSA's SaferCar.gov has logged approximately 500 complaints about Ford's transmission, according to Capstone's count.

Numerous software and hardware upgrades have vastly improved the PowerShift's performance, says Ford engineering manager Chris Kwasniewicz. But unlike European consumers, most American motorists haven't driven a stick shift, so they aren't accustomed to a dual clutch's more abrupt gear shifts.

In 2011 "we found that North American customers were not really ready for this application yet," Kwasniewicz said. "European customers understood the startup shudder. They were used to that. They grew up with manuals and were accustomed to them." So Ford has asked dealers to explain PowerShift's characteristics to shoppers, he said. Their message: "Don't be rattled. It will act a little different. And it will deliver the fuel economy that you want."

Sales personnel at Village Ford in Dearborn, Mich., took the company's advice to heart, said Bob Wheat, the dealership's sales manager. "If customers are prepared for it and understand it, then they have no issues," Wheat said. "People who haven't driven a manual transmission expect the car to be smooth as silk, so we have to set the right expectation level."

While Ford is the target of Capstone's lawsuit, it isn't the only automaker that has struggled with dual-clutch issues. Honda Motor introduced an eight-speed dual-clutch transmission on the 2015 Acura TLX sedan, followed by the ILX compact sedan.

To ensure smoother performance at low speeds, Honda added a torque converter, but complaints piled up anyway. SaferCar.gov has logged 38 reports from motorists who said their vehicles hesitated, surged or suffered from jerky shifts at low speeds.

Gary Robinson, Acura's U.S. product chief, told Automotive News that Honda issued a software upgrade to improve the transmission's performance at low speeds. "We've made some good improvements -- mostly software," Robinson said. "I would say it's pretty normal with a new piece of technology. We are continuously improving it."

Other transmission woes

While Ford's and Honda's dual-clutch woes have attracted attention, other types of transmissions have experienced teething problems, too.

Now, assorted transmission woes are showing up in J.D. Power's annual quality surveys. According to the research firm's most recent Initial Quality Study, transmission issues now are the seventh most frequent consumer complaint. Transmission problems ranked 10th in 2013, and eighth in 2014. As far back as 2009, transmissions were not a Top 10 problem in the IQS.

For many years, conventional automatic gearboxes with four, five or six speeds generated very few complaints, said Renee Stephens, vice president of U.S. auto quality for J.D. Power. The auto industry "got really good at it," Stephens said. But new transmissions of all kinds have proved difficult to calibrate, she said: "The main problem is hesitation and shifting at inappropriate times, particularly at low speeds. If motorists press on the gas and it doesn't accelerate, then it's not meeting their expectations."

So, will dual-clutch transmissions carve out a niche in the U.S.? This year, automakers are expected to sell 603,000 dual-clutch gearboxes in the United States -- about 3.5 percent of total U.S. light-vehicle sales, according to a forecast by IHS Automotive.

By 2020, dual-clutch vehicle sales are expected to rise to 885,000, or 5 percent of total light-vehicle sales. So IHS Automotive expects the transmission's U.S. niche will expand -- but only a little bit.

Dual-clutch transmissions "have taken a beating among consumers," said IHS researcher David Petrovski. "If people aren't used to it, they think something is wrong."

WASHINGTON -- Volkswagen said today that engineers installed illegal emissions software in 2.0-liter diesels sold in the U.S. after finding it initially “impossible” to meet tough U.S. limits on nitrogen oxide emissions legally.

The disclosure, made early today by VW Chairman Hans Dieter Poetsch in a press conference in Wolfsburg, Germany, marks the first time the company has explained the origins of the emissions crisis that has upended the company and prompted investigations by legal and regulatory authorities worldwide hundreds of U.S. lawsuits.

Poetsch said the company still believes a “comparatively small” number of employees were directly responsible for the emissions conceit. In a statement, VW said it had suspended nine managers who “may” have been involved in the emissions manipulations.

Poetch also blamed process failures and noted that some parts of the company tolerated rule violations that allowed the conceit to continue.

“The key finding is that we are not talking about a one-off mistake but a whole chain of mistakes that was not interrupted at any point along the timeline,” Poetsch said through an interpreter at the press conference.

The illegal 2.0-liter software’s roots traced back to 2005, when VW made a “strategic decision to launch a large-scale promotion” of diesel vehicles in the U.S. market, according to a VW statement.

At that time, U.S. regulations limiting the amount of nitrogen oxide emissions were far more stringent than those in Europe. Engineers were working to develop a new 2.0-liter diesel engine for the U.S. market, dubbed the EA 189, but were unable to engineer an emissions system that could comply with the stringent NOx requirements that also achieved cost and timing targets, Poetsch said.

In turn, the engineers developed software that contained two emissions strategies: one to yield low NOx in lab tests and another for real-world driving that produced significantly higher NOx levels.

“Looking back, we regrettably have to recognize that the developers involved in the EA 189 project quite simply could not find a way to meet the tougher NOx limits in the United States by permissible means, or at least they could not find a way they felt at the time to be meaningful and that fitted the timeframe and the budget they had been given,” Poetsch said.

Roots of the scandal

Early on, the deceit worked.

The first U.S. vehicle to go on sale with the EA 189 engine containing illegal emissions software was the 2009 Jetta and Jetta Sportwagen. Volkswagen press releases heralded the model’s arrival as a silver bullet -- a compact car with almost hybrid-like fuel economy that was still fun to drive and less expensive than a hybrid.

The Jetta TDI won scores of accolades and “green car” honors and helped to carve out a niche for Volkswagen in the U.S. auto market. Volkswagen soon deployed its “clean diesel” technology to the Golf, Beetle and Passat in the years that followed and before the EPA announced the illegal software in September, diesels had accounted for more than 20 percent of VW’s 2015 U.S. sales.

And even after switching to more effective emissions control technologies, VW continued to use the software.

The original EA 189 diesel used a “lean NOx trap” exhaust system to reduce NOx tailpipe emissions.

It was a novel approach. Other competitors readying clean diesels for the U.S. market used a urea-based selective catalytic reduction after treatment system to reduce NOx. The systems were proven by competitors to be effective in reducing NOx to permissible levels, but were more expensive than the lean NOx trap used on the first-generation EA 189 engine.

Later generations

VW changed course, launching the 2012 Passat TDI with the second generation of VW’s EA 189 engine with its own SCR exhaust aftertreatment system. VW later equipped the technology on all of its 2.0-liter diesel models in U.S. by the 2015 model year when its third-generation diesel engine arrived.

Yet the software that calibrated one emission setting for the lab and another for the road continued to be used, and the new SCR systems weren’t used to their full NOx-reduction potential. All the while, VW’s TDI owners regularly reported real-world fuel economy far in excess of the already high EPA label values.

“Later down the line, when the effective technical solutions to reduce NOx became available, these solutions were not in fact used as they should have been done, apparently in the mistaken interest of customers,” Poetsch said.

Poetsch said the software could “vary” the amount of urea injected into the SCR system to clean NOx.

In general, injecting lower amounts of urea would yield better fuel economy, but higher NOx emissions. Higher “doses” would have cut NOx, but lowered fuel economy.

“As a result NOx levels on the test bench were particularly low but they were significantly higher on the road,” Poetsch said. “With hindsight, this all sounds almost a little banal, but that is perhaps why we find the whole thing so painful.”

Poetsch said the actions go against the values of Volkswagen and its 600,000 employees.

“We still do not know what these people involved in this issue from 2005 to the present day were fully aware of the risks they were taking and of the potential damage they could expose the company to,” said Poetsch, “but that’s something else that we’re going to find out.”

When Elon Musk unveiled Tesla's (NASDAQ:TSLA) Model X in September, he highlighted that the new electric SUV has an optional HEPA filter that can filter air within the passenger cabin to hospital-grade quality. In an small jab at Volkswagen's Dieselgate scandal, he added, "We designed the car well before recent events."

As one of the biggest champions of the environment, you might think that he'd be quite supportive of all the punitive fines that the German automaker potentially faces. Well, it turns out that he doesn't think making Volkswagen fix all of its polluting diesel cars is the best way to go. Let me explain.

Stop looking back
Musk, along with dozens of other influential investors and environmentally friendly industry executives, have penned an open letter to the California Air Resource Board, or CARB. In it, the group points out that Volkswagen's cheating is indicative of the fact that diesel engine technology has reached a point of "de miminis returns" in its ability to improve performance while also abiding by tightening emissions regulations.

The current solution of drivers voluntarily bringing in their cars for recalls and fixes may not prove too viable, since those drivers may not want to hurt the performance of their vehicles. Plus, retrofitting these cars with urea tank systems is expensive. In essence, Musk and others don't believe that pursuing this option is a viable solution, nor is it particularly enforceable where it matters. Instead, the letter lays out another plan that does not involve Volkswagen fixing the affected models:

The letter suggests that CARB release Volkswagen from its obligation to fix the vehicles, since there are an "insignificant" number of total affected vehicles within the state of California, and these cars don't present any active emissions-related risk.
CARB should instead require Volkswagen to accelerate its timeline for the development (which Volkswagen is already doing as part of its crisis response) and launch of a fully electric vehicle with zero emissions. The group points out that this step requires no resources to verify, since electric cars emit zero emissions by definition.
CARB should also require that this timeline result in a 10-to-1 (or more) reduction in emissions compared to the pollution related to the diesel vehicles, and this should be accomplished over five years.
Volkswagen should be required to invest in manufacturing plants and development of electric cars. This amount should be comparable to the fines that it would otherwise face.
Grant Volkswagen some flexibility in the timing and execution of this plan with zero-emission-vehicle credits.
According to the letter, this five-step plan is more desirable because it is more enforceable, does a better job at reducing overall emissions and offsetting the damage from the diesel engines, creates jobs, and builds long-term electric vehicle infrastructure. The group notes that a similar solution was enacted way back in 1990 for an industrywide emissions scandal. Instead of focusing on fixing affected vehicles, the EPA accelerated its timeline on stricter emissions regulations.

Put simply, Musk and others think that the current proposal focuses too much on the past, while this solution could have a greater positive impact on the future.