Unsealed papers in VW scandal reveal panic among engineers

As California regulators pursued Volkswagen to get to the bottom of its emissions scandal in the spring and summer of 2015, engineers at the carmaker who knew about the cheating were in a state of panic.

A US legal filing unsealed on Friday shows a group of VW employees attempting to cover up the cheating as questions from the California Air Resources Board became more and more detailed.

On April 28th 2015, an unnamed VW employee wrote: “We only just need a plausible explanation as to why the emissions are still high!!!”

On May 12th, one employee wrote about the emissions discrepancies between test conditions and real-world conditions: “We need a story for the situation!”

The emails are quoted in an indictment, dated June 1st, against James Liang, 62, a veteran Volkswagen engineer who spent 30 years with the company. On Friday he pleaded guilty to a conspiracy to defraud US customers and regulators.

Cheat devices

As VW admitted one year ago, up to 11 million of its cars - including 110,000 in Ireland - were equipped with illegal “defeat devices” to recognise when its cars were undergoing tests.

By detecting vehicle speed, acceleration, air pressure and the position of the steering wheel, VW cars knew when they were on a dynamometer - a sort of treadmill for cars - used for emission tests. The car would then flick on emissions control software to reduce nitrous oxide (NOx) pollution, hiding from regulators what it was actually spewing out in the real world.

The discrepancies first came to light in March 2014, when a West Virginia University study raised questions about the real world emissions of some VW cars. According to the case against Mr Liang, he and his team reacted to that study by pursuing "a strategy to disclose as little as possible" about the illegal software. They "intentionally made . . . false and fraudulent statements" to the Environmental Protection Agency and CARB to make the discrepancies appear as if they were "innocent mechanical and technological problems".

An official at CARB said in February that the emissions issue was initially treated as an anomaly, not an act of wilful misconduct. But he said VW engineers were unusually unco-operative. “They took issue with the way we conducted the tests, with the data we compiled, how we conducted the on-road measurements,” he said.

With more time, it became “abundantly clear” something was off, because the car being tested was running “more cleanly when it was cold than when it was hot, contrary to all tenets of automotive engineering,” the official said.

In the spring and summer of 2015, regulators improved their testing to effectively trick the cars into thinking they were on the open road. As a result the VW cars responded by emitting higher levels of NOx. The regulators soon discovered what appeared to be “a second set of commands” - one set for being on the road, another for test conditions.

With its newfound knowledge, CARB asked more penetrating questions to the engineers, renewing panic with the community of employees involved in the cheating.

‘No good explanations’

On June 29th, an unnamed VW employee wrote: “We must be sure to prevent the authority from testing the Gen 1!” - a reference to the EA 189 engine that Mr Liang helped design - “If the Gen 1 goes onto the roller at the CARB, then we’ll have nothing more to laugh about!!!!”

Another concedes on July 23rd: “[C]ARB is still waiting for Answers . . . We still have no good explanations.”

Mr Liang worked for VW in the Wolfsburg, Germany headquarters, where he helped develop the illegal software in 2006. In 2008 he moved to VW's Oxnard, California facility, where he helped diesel engines fitted with the software to be certified. The engines were at the centre of a major push to popularise its "Clean Diesel" technology.

After the West Virginia study came out in 2014, Mr Liang helped his co-conspirators “continue to lie to the EPA, CARB and VW customers”. He also admitted that when, in early 2015, Volkswagen recalled half a million cars to “fix” the emissions problem, he knew the recall would not work.

Mr Liang’s role in the conspiracy therefore involved two parts: the original cheating, as well as a cover-up to mislead regulators once they were on a path to detect it.

What is not known is whether Mr Liang’s cheating, and his move from Germany to the US, was directed by higher management.

“He’s not that senior in the totem poll,” an attorney familiar with the case said. “The normal game plan is that you reach a deal with the lower level guys, and you flip them.”

Michelle Krebs of Autotrader. com, added: "It begs the question: OK, who's next? This is probably the first of many. How far up does this go? Companies had better pay attention because the feds aren't fooling around."

- (Copyright The Financial Times Limited 2016)