Volkswagen has announced that the diesel emissions scandal will cost the company an extra $3 billion (€2.5 billion), because engines are proving “far more technically complex and time consuming”.
The additional cost, for fixing engines in the US, takes the total bill to $30 billion.
Two years after the diesel emission cheating scandal first emerged, VW is still struggling to put the crisis behind it.
Separately Munich prosecutors made an arrest in connection with the scandal.
German media reports have named the person taken into custody as Wolfgang Hatz, former board member at VW unit Porsche. But there has been no official confirmation of his identity.
Wolfgang Hatz was head of Research and Development at VW-owned Porsche and had held other roles in the VW group, including in engine development at Audi. He was suspended after the diesel emissions test-cheating was exposed. He then left the company.
In 2016, Porsche said no evidence had been found against Wolfgang Hatz.
Wolfgang Hatz was reportedly close to former VW chief executive, Martin Winterkorn, who has denied any knowledge of the “defeat devices” which allowed vehicles to artificially reduce emissions during tests before their existence was exposed publicly.
Another former Audi executive, Giovanni Pamio, was taken into custody earlier this year, at the request of the US Department of Justice. One man has so far been jailed in connection with the scandal: Volkswagen engineer James Liang received a 40 month sentence in a US court last month.
News of the additional financial burden from dealing with vehicles in the US underlines the difficulty VW is having extricating itself from the scandal.
VW shares initially fell sharply on September 29 although they later recovered most of the lost ground.
The automaker first admitted in September 2015 that it had used illegal software to cheat US emissions tests.
Since then VW has been adapting its cars to meet legal requirements. However, the process in the US is proving tougher than expected.
It is also amending cars in Europe, but the process there is more straightforward, VW said.
The additional costs will be reflected in Volkswagen’s third quarter results, which will be reported next month.
The Audi recall affects cars fitted with six- and eight-cylinder diesel motors meeting the Euro 5 and Euro 6 emissions criteria, including some models made by parent company Volkswagen and sister company Porsche.
The upgrade is available for Audi cars with affected engines in Europe and other markets outside North America.
The Reuters news agency reported that German car industry officials and politicians had agreed to improve diesel vehicles’ emissions through software updates in order to avoid diesel bans in cities.
Volkswagen will provide a two year guarantee for the cars in Europe fitted with emissions cheating devices which it agreed to modify.
According to the auto maker, the two year guarantee will cover exhaust and emissions control parts.
The European Commission has been putting pressure on VW to compensate customers over its emissions scandal, but the company has refused.
And European class action lawsuits are picking up steam.
The guarantee has conditions attached -it will only cover certain car parts in vehicles that have been driven for under 250,000km (about 155,000 miles), and will depend on the service history of the car and the age of the affected parts.
In September 2015, VW admitted to US regulators that it had cheated on emissions tests there using software installed in as many as 11 million diesel vehicles sold worldwide – the majority of them in Europe.
In the aftermath of the diesel emissions scandal, VW agreed to modify millions of vehicles in Europe which were equipped with the software capable of undermining the emissions testing process.
In the wake of the scandal, VW’s share price dropped dramatically. Investigators are examining whether executives knew about the magnitude of the unfolding scandal – which began in the US – but failed to inform the markets in a timely manner.
As a rule, executives are expected to keep investors updated as soon as potentially price-sensitive information comes to light.
Porsche SE said the allegations were unfounded, adding it had complied with disclosure rules.
The holding company is based in Stuttgart. It is owned by the Porsche and Piech families – descendants of Ferdinand Porsche, the man who designed the Volkswagen Beetle and founded the sports car business that bears his name.
German car giant Volkswagen has agreed to pay at least $1.2 billion to fix or buy back 78,000 diesel cars in the United States to settle more emissions-cheating claims.
Without regulatory approval, VW could be forced to buy back all of the cars, costing it about $4 billion.
The deal, another in its long-running emissions scandal, still needs approval from the courts.
Car components company Robert Bosch GmbH, a VW supplier, has also agreed to pay $327.5 million to US owners of affected cars.
The proposed settlements for the 3-liter cars are the last major US hurdle for VW over its emissions scandal.
VW previously agreed to spend up to $10 billion to compensate the owners of about 482,000 2-liter vehicles after it admitted it had installed secret software to disguise emissions.
On February 1, the Federal Trade Commission (FTC) said that US customers who bought the 3-liter diesel cars would be fully compensated “through a combination of repairs, additional monetary compensation, and buybacks for certain models”.
Owners of 2009 to 2012 models could get between $26,000 to $58,000 for a buyback, depending on the model, mileage, and trim of the car, the FTC said.
For owners and people leasing 2013 to 2016 models, VW is expected to get regulatory approval for a fix that makes the cars compliant with US environmental regulations, the FTC added.
However, if VW fails to get EPA and the California Air Resources Board approval for the modification within a certain time frame, it must offer to buy back those vehicles, upping the amount it has to pay to about $4 billion.
According to German prosecutors, former VW CEO Martin Winterkorn may have known the automaker was cheating on emissions tests earlier than he admitted.
He quit in September 2015 after VW admitted to using software to lower the emissions from its diesel vehicles during tests.
Martin Winterkorn has since denied knowing of the violations until late in August 2015, shortly before the board reported them.
However, German authorities said they were now investigating Martin Winterkorn for fraud.
Braunschweig prosecutors said they had searched 28 homes and offices this week in connection with the scandal.
As a result, the number of people accused of misconduct had risen from 21 to 37, including Martin Winterkorn.
German prosecutors said in a statement: “Sufficient indications have resulted from the investigation, particularly the questioning of witnesses and suspects as well as the analysis of seized data, that the accused [Martin Winterkorn] may have known about the manipulating software and its effects sooner than he has said publicly.”
Earlier this month, VW admitted to US prosecutors that about 40 employees had deleted thousands of documents in an effort to hide systematic emissions cheating from regulators.
VW was also fined $4.3 billion by US authorities and agreed to plead guilty to criminal charges.
In addition, VW has agreed to a $15 billion civil settlement with environmental authorities and car owners in the US.
The company is also facing 8.8 billion euros ($9.41 billion) in damage claims following the collapse of VW’s share price after the scandal broke.
VW shares slumped by a third in the immediate aftermath of the scandal and are still 7% below their September 2015 level.
German automaker Volkswagen has pleaded guilty to three criminal charges in the United States and will pay fines totaling $4.3 billion to settle charges over the emissions-rigging scandal.
VW will pay $2.8 billion in criminal fines and $1.5 billion in civil penalties.
US Attorney-General Loretta Lynch said the company denied and then lied in a bid to cover up its actions.
The fines amounted to one of the biggest clean air penalties ever achieved, Loretta Lynch added.
Six VW executives and managers have also been charged over their role in the emissions cheating.
Volkswagen Group CEO Matthias Müller said the company “deeply regrets” its actions.
Hans Dieter Pötsch, chairman of VW’s supervisory board, said: “We are no longer the same company we were 16 months ago.”
The DoJ said VW had a long-running scheme to sell about 590,000 diesel vehicles in the US fitted with a defeat device to cheat on emissions tests.
VW will be on probation for three years and be overseen by an independent monitor during that period.
The company has agreed to co-operate with the DofJ’s investigation and prosecution of six executives involved in the crimes.
VW is pleading guilty to “participating in a conspiracy to defraud” the US and its American customers, as well as breaking the Clean Air Act by using cheating software in its cars.
The company is also charged with obstruction of justice for destroying documents related to the scheme, and with importing the cars into the US “by means of false statements about the vehicles’ compliance with emissions limits”.
There are still investor and consumer lawsuits pending in Europe.
The $4.3 billion fines means that the total costs associated with the emissions cheating scandal are set to exceed the $19.2 billion VW has set aside to deal with the issue.
VW has already agreed to a $15 billion civil settlement with environmental authorities and car owners in the US.
German automaker Volkswagen has agreed a draft $4.3 billion settlement with the Department of Justice and US Customs over the emissions-rigging scandal.
VW also said it would plead guilty to breaking certain US laws.
The company said it was in advanced discussions with the DoJ and US Customs about the deal.
The final agreement has yet to be approved by VW’s management and supervisory board, which could happen later on January 11.
The company said it had negotiated a “concrete draft” of a settlement with US authorities that included criminal and civil fines totaling $4.3 billion, as well as appointing an independent monitor for the next three years.
The fine means that the total costs associated with the emissions cheating scandal are set to exceed the $19.2 billion VW has set aside to deal with the issue.
Volkswagen has already agreed to a $15 billion civil settlement with environmental authorities and car owners in the US.
The scandal erupted in September 2015 when the EPA found that many VW cars sold in America had a “defeat device” – or software – in diesel engines that could detect when they were being tested and adjust the performance accordingly to improve results.
VW subsequently admitted cheating emissions tests in the US and many countries throughout the world.
On January 9 it emerged that VW executives knew about emissions cheating two months before the scandal broke, but chose not to tell US regulators, according to court papers.
The executives involved include Oliver Schmidt, who was in charge of VW’s US environmental regulatory compliance office from 2012 until March 2015.
On January 9, Oliver Schmidt was charged with conspiracy to defraud and has been remanded ahead of a court appearance on January 12.
Volkswagen is being sued in Australia for allegedly misleading customers by selling modified vehicles that covered up emissions fraud.
The Australian Competition and Consumer Commission (ACCC) claims VW intentionally sold more than 57,000 such vehicles over a five-year period.
It is seeking a public declaration of misconduct, financial penalties and corrective advertising.
VW Australia said it is reviewing the ACCC claims.
In a statement, the company said it does not think that the court action “provides any practical benefit to consumers because software solutions for cars affected by the voluntary recall are expected soon”.
Volkswagen Group Australia managing director Michael Bartsch said: “The best outcome for customers whose vehicle is affected is to have the voluntary recall service updates installed.”
The ACCC lawsuit covers 10 VW car models including the top-selling Golf, Passat and Polo,
ACCC chairman Rod Sims said in a statement: “These allegations involve extraordinary conduct of a serious and deliberate nature by a global corporation.
“We expect higher standards of behavior from all companies that supply to Australian consumers.”
The world’s second-biggest auto maker is also facing several private class action lawsuits in Australia.
VW has suffered a global backlash since revealing last year that around 11 million of its vehicles had software or so-called “defeat devices” designed to bypass official emissions tests.
The company has since had to pay billions of dollars in fines and settlements with both regulators and customers around the world.
The sales of 80 Volkswagen models have been suspended in South Korea and the automaker will be fined over allegations the company rigged emissions test data.
VW will be fined 17.8 billion Korean won ($16 million), in addition to a 14 billion won fine from 2015, the ministry of environment said.
The German automaker admitted last year that it had falsified emissions data in its diesel vehicles.
VW has since suffered a global setback in sales and reputation.
The sales ban in South Korea affects 32 types of cars – including the VW Golf and Jetta – but a total of 80 models, which include different size engines or trimmings of each type of car.
The ban, which affect VW, Audi and Bentley models, come as the result of an extensive probe into the company which saw the automaker’s offices in South Korea raided by investigators.
South Korea’s environment ministry also revoked certification for an additional 83,000 cars, bringing the total number of cars de-certified to more than 200,000.
That is about 68% of the 300,000 cars sold by VW in Korea since 2007, Yonhap news agency said.
South Korea is an important market for VW, especially for the company’s luxury brands Bentley and Audi, and the company had more than tripled its sales before it was hit by a slump in the wake of the emissions scandal.
Volkswagen profit fell 20% in Q1 of 2016 as the auto maker continues to grapple with fallout from the diesel emissions scandal.
Pre-tax profit fell to €3.2 billion in Q1 of 2016, down from €3.97 billion in the same period a year ago.
VW CEO Matthias Muller said he was “satisfied” with the start of “what will undoubtedly be a demanding” 2016.
The German giant admitted last year that it installed software to cheat US emissions tests.
VW has already set aside more than €16 billion to pay for costs arising from the scandal.
The company has agreed a deal with the DoJ in which it will buy back and “substantially” compensate more than 500,000 American owners of its diesel cars affected by the emissions cheating. Final details are expected in June.
“In the first quarter, we once again managed to limit the economic effects of the diesel issue and achieve respectable results under difficult conditions,” Matthias Muller added.
VW Group sales revenue fell 3.4% to €51 billion in the period.
Sales of VW-branded cars were particularly hard hit, with profit from that part of the business falling 83% to €73 million from €514in 2015.
VW maintained its forecast of a 5% fall in 2016 sales revenue compared with last year, “depending on economic conditions – particularly in South America and Russia – and exchange rate developments as well as against the backdrop of the diesel issue”.
However, the company predicted “a marked decrease in sales revenue” in 2016 for its passenger car brands, which include Audi, Seat and Skoda.
Matthias Muller said: “2016 will be a transitional year for Volkswagen… we remain confident that our operating business will again record solid growth this year.”
After publishing the profit report, VW shares fell 3% in Frankfurt to €133.57 and are down 40% over the past 12 months.
Volkswagen is being sued by a Norwegian sovereign wealth fund over the car giant’s emissions scandal.
Norges Bank Investment Management, the world’s largest fund, said it had been advised by lawyers that VW’s conduct “gives rise to legal claims under German law”.
VW admitted last year that it had installed secret software to cheat US emissions tests.
The move, from one of VW’s biggest investors, is the latest in a flood of legal actions over the scandal.
VW faces action from US Department of Justice, the Federal Trade Commission and its own dealers.
Norges Bank Investment Management is worth $850 billion (€751 billion) and has stakes in more than 9,000 companies.
According to the Financial Times, which first reported the story, the lawsuit is expected in the coming weeks. It will be filed in Germany, joining class-action cases which are being prepared there.
“Norges Bank Investment Management intends to join a legal action against Volkswagen arising out of [the fact that] the company provided incorrect emissions data,” the statement said.
“As an investor, it is our responsibility to safeguard the fund’s holding in Volkswagen.”
In April, VW reached a deal with US authorities in which it agreed to offered to buy-back almost half a million vehicles and provide money for a fund to help develop cleaner car technology.
Norges Bank Investment Management recently announced action to clamp down on excessive executive pay at the companies it invests in, as well as encouraging oil companies to report more on the risks of climate change.
Volkswagen has announced it set aside more than double provisions for the diesel emissions scandal to €16.2 billion.
In 2015, VW told shareholders that €6.7 billion had been set aside for potential costs or recalls.
The increased sum included the cost of fixing cars that violate air pollution standards, buying back vehicles and legal costs.
The move comes as German carmakers agreed to recall 630,000 diesel vehicles to tweak engine software.
German transport minister Alexander Dobrindt said Mercedes Benz, Opel and Porsche as well as VW and Audi would adjust settings that increased levels of emissions such as nitrogen dioxide in some diesel cars.
Shares in Daimler fell 4.6% in Frankfurt after the Mercedes owner said it had begun an internal investigation into its diesel emissions testing at the request of the US Justice Department.
Daimler said net profit for Q1 of 2016 fell by a third to €1.4 billion, held back by costs associated with the launch of the new E-Class range. The bigger-than-expected decline came despite a 2% rise in revenue to €35 billion as sales rose 7% to 683,885 vehicles.
VW CEO Matthias Muller said he could not put a figure on the total cost of the emissions scandal until a final deal was reached with US authorities.
Nor could the company release preliminary findings from an investigation it commissioned from law firm Jones Day until reaching an agreement, it said.
VW still faced the DoJ fines as part of an expected civil settlement, as well as possible criminal charges.
On April 21, a US court disclosed details of a deal between VW and the DoJ for more than 500,000 American owners of its diesel cars affected by the emissions cheating.
The deal will involve buybacks and “substantial” compensation for owners of mostly two-liter vehicles.
The increased emissions provision pushed VW to an annual pre-tax loss of €1.3 billion, compared with a profit of €14.7 billion the previous year.
VW expected group sales to fall by up to 5% in 2016.
Chief financial officer Frank Witter said: “We are again operating in an exceedingly challenging environment in which global demand for new vehicles is declining, exchange rates and interest rates remain highly volatile and competition in many of our markets is intensifying.”
VW shares closed down 1.7% in Frankfurt on April 22 and are more than 40% lower than at this time last year.
Volkswagen has reached a deal with the US authorities in the diesel emissions scandal.
The German giant will offer “substantial compensation” and car buy-back deals as part of the settlement.
Final details of the packages offered will be announced in June, but a court had given VW and regulators until April 21 to reach a deal in principle.
In 2015, US regulators discovered that VW cars were fitted with software that could distort emissions tests.
The automaker subsequently said 11 million cars worldwide were affected.
Details of the preliminary agreement were announced in a California court. US district court Judge Charles Breyer said the settlement would include a buyback offer for nearly 500,000 2.0-litre vehicles.
He did not give details of how much car owners would offered in compensation, but said the deal between Volkswagen, the US government and private lawyers would be “substantial”.
Judge Charles Breyer said VW would also pay into an environmental fund and commit other money to promote green car technology.
The company told its shareholders in 2015 it had set aside $7.3 billion to help defray the potential costs of a recall or regulatory penalties, but that figure could rise. The company faces as much as $20 billion in fines for Clean Air Act violations alone.
VW installed software in the diesel engines to detect when they were being tested and cheat the results. Some models could have been pumping out up to 40 times the legal limit of the pollutant, nitrogen oxide, regulators disclosed.
The company’s lawyer, Robert Giuffra said: “Volkswagen is committed to winning back the trust of its customers, its dealers, its regulators and all of America.”
The agreements are “an important step forward on the road to making things right,” he added.
VW said in a statement that it “intends to compensate its customers fully and to remediate any impact on the environment from excess diesel emissions”.
The automaker said a deal in principle had been reached with the Justice Department, the Environmental Protection Agency and the California Air Resources Board.
VW added that it had “reached an agreement on the basic features of a settlement with the class action plaintiffs in the lawsuit in San Francisco. This agreement will be incorporated into a comprehensive settlement in the coming weeks”.
The deal announced on April 21 covers mostly 2-liter vehicles.
Judge Charles Breyer said he expects an agreement between VW and regulators covering about 90,000 larger vehicles and SUVs to be addressed “expeditiously”.
Volkswagen has to come up with a plan to fix 600,000 cars that emit illegal levels of pollution by April 21, a US court has ruled.
The US District Court Judge said: “This issue of what is to be done with these cars must be done by that date.”
If a plan is not in place by April 21, the court will consider what action to take.
The auto maker said it was committed to resolving the US investigation “as quickly as possible”.
In September 2015, US authorities revealed that VW had used computer software to massage emissions data during tests, sparking the biggest crisis in the company’s history and leading to the departure of its CEO.
The DoJ is suing VW for breaching environmental laws.
In emerged that more than 11 million VW cars worldwide have been fitted with the devices.
VW has set aside €6.7 billion to cover the costs of the scandal, although earlier this month the company warned this might not be enough.
German and French prosecutors have broadened their investigations into VW emissions scandal.
French authorities have opened a formal probe into “aggravated fraud” over the use of diesel engine devices that gave misleading emissions results.
German prosecutors said the number of VW employees now under investigation has increased from six to 17.
Volkswagen, which said it is cooperating with all inquiries, had about 11 million cars fitted with the emissions devices.
Europe’s largest automaker is carrying out its own investigation, and has warned that the cost of car recalls and compensation was likely to run into billion of euros.
Paris prosecutors started preliminary inquiries in 2015, and confirmed on March 8 that three magistrates had been assigned to a formal probe.
Serious fraud office chief Nathalie Homobono said investigators had established that VW had cheated “with intent” by installing so-called engine software that reduced emissions under test conditions.
Meanwhile, German authorities said they had increased the number of VW employers under investigation to 17, but added that no former or current board members are involved, said Klaus Ziehe, from the state prosecutors office in Braunschweig, Lower Saxony.
Also on March 8, Reuters and the Financial Times were among media reporting that German insurer Allianz Global Investors, a VW shareholder, was close to filing a lawsuit against the carmaker following the fall in VW’s share price.
In January, the US Department of Justice filed a civil suit against VW, and the automaker faces a string of claims from customers that lawyers are likely to consolidate into a class action suit.
VW says it will not comment on specific details of the investigations.
Spokeswoman Jeannine Ginivan told the AFP news agency: “As previously stated, Volkswagen is not commenting on ongoing discussions with regulators. We are committed to regaining the trust of our customers and dealers and will continue to cooperate with all relevant government agencies.”
VW has announced that it will not release its results nor hold its shareholders’ meeting on time, as it needs more time to work out its accounts as a result of 2015’s emissions crisis.
The automaker was due to release results on March 10 and hold its shareholders’ meeting towards the end of April.
Volkswagen has not said by how much these events will be delayed.
The company says results will be about the same as in 2014, although the cost of the crisis will eat into those.
VW said it was working on “valuation calculations”.
Sales in VW-branded cars dipped last year after the scandal – which affected 11 million cars – came to light in September. Deliveries fell 5.3% in October, 2.4% in November and 7.9% in December compared with those months in 2014.
It was its first drop in VW-branded sales in 11 years as the company continues to cope with the emissions scandal.
VW has promised it will have a fix in the coming weeks for the millions of US cars with defeat devices that disguised emission levels in diesel cars.
Sales of VW-brand cars fell 4.8% in 2015 to 5.82 million cars from 6.12 million a year earlier.
The Environmental Protection Agency (EPA) is suing the company over what it says were 600,000 affected vehicles and a US law firm is conducting an investigation into who made the decisions to cheat.
VW says it is sticking to its plan to publish the findings of its investigation into the scandal in the second half of April.
Results from Porsche, which is owned by Volkswagen, are also being delayed.
European auto sales rose 9.2% in 2015 reaching 14.2 million vehicles.
However, it still remained below levels prior to the economic crisis.
The 9.2% increase was driven in large part by incentive schemes, according to the Brussels-based trade body, the Association of European Carmakers.
Several auto makers achieved double digit growth, including Daimler (17.7%) and Fiat-Chrysler (13.6%).
Amid the emissions scandal, VW’s sales climbed only 6.2% and the group’s market share slid from 25.5% to 24.8%.
The annual figures were boosted by a strong December when sales jumped 15.9% to nearly 1.16 million, marking the 28th consecutive month of growth.
The figures include all EU members except Malta, and the three European Free Trade Association countries, Iceland, Norway and Switzerland.
Sales grew strongly in Spain (20.9%) and Italy (15.8%) in 2015, helped by government incentive schemes to encourage buyers. Sales also rose in the other major markets of France (6.8%), the UK (6.3%) and Germany (5.6%).
Car sales in the EU and the wider EFTA free trade area reached a peak of nearly 16 million in 2007. They subsequently fell to a low of just over 12.3 million in 2013 before rising again in 2014.
The association said the trend in 2015 was “positive, but in absolute terms, volumes remain low”.
VW’s recall plan for diesel cars equipped with emissions “cheat” devices has been rejected by US regulators.
The California Air Resources Board (CARB) said VW’s proposals did “not adequately address overall impacts on vehicle performance, emissions and safety”.
The CARB also said the proposed fix was not fast enough.
It said it would continue its investigation as well as talks with VW to find a suitable solution.
The head of the CARB, Mary Nichols, said: “Volkswagen made a decision to cheat on emissions tests and then tried to cover it up.
“They continued and compounded the lie and when they were caught they tried to deny it. The result is thousands of tons of nitrogen oxide that have harmed the health of Californians. They need to make it right.”
The federal Environmental Protection Agency (EPA) also said the VW plan for cars with 2 liter diesel engines was not acceptable.
The rejection comes ahead of a meeting between VW CEO Matthias Muller and EPA chief Gina McCarthy on January 13 to discuss the emissions scandal.
Volkswagen said in response: “Today’s announcement addresses the initial recall plans Volkswagen submitted to CARB in December. We are committed to working co-operatively with CARB and other regulators, and we plan to continue our discussions tomorrow when we meet with the EPA.”
The issue affects almost 600,000 cars in the United States and up to 11 million worldwide.
The scandal has severely damaged VW’s reputation and sparked investigations in several countries.
In the US alone VW is facing fines that could run into tens of billions of dollars.
The Department of Justice is suing Volkswagen on behalf of the EPA with a lawsuit that was filed on January 4 in a federal court in Detroit, Michigan.
The DoJ said the filing was the first step in “bringing Volkswagen to justice”.
VW has been sued by the US Justice Department over the emissions scandal that saw the German automaker fitting software in millions of cars to cheat emissions tests.
In September 2015, following an investigation by the US Environmental Protection Agency (EPA), VW admitted fitting the so-called defeat device on 11 million cars globally.
The emissions scandal has hit Volkswagen sales worldwide.
The German car giant has put aside billions of euros to deal with the fallout.
The lawsuit, on behalf of the EPA was filed on January 4 in a federal court in Detroit, Michigan.
“The complaint alleges that nearly 600,000 diesel engine vehicles had illegal defeat devices installed that impair their emission control systems and cause emissions to exceed EPA’s standards, resulting in harmful air pollution,” the filing said.
It also alleges that VW “violated” clean air laws by selling cars that were different in design from those originally cleared for sale by the EPA.
“With today’s filing, we take an important step to protect public health by seeking to hold Volkswagen accountable for any unlawful air pollution, setting us on a path to resolution,” said assistant administrator Cynthia Giles for the EPA’s Office of Enforcement and Compliance Assurance.
“So far, recall discussions with the company have not produced an acceptable way forward. These discussions will continue in parallel with the federal court action.”
The department said the filing was just the first step in “bringing Volkswagen to justice”.
VW is also facing separate criminal charges, and a raft of class-action lawsuits filed by car owners.
The EPA says that VW fitted many of its cars with a device that was able to recognize test conditions and adjust the engine settings accordingly, with the express purpose of giving distorted readings on nitrogen oxide emissions.
VW admitted to “totally screwing up”, and there has been a shake-up in the management structure and personnel as a result. Martin Winterkorn resigned as CEO and was replaced with Matthias Muller, the former boss of Porsche.
The company is currently conducting an internal investigation that it says will “leave no stone unturned”.
VW will begin recalling millions of cars worldwide soon, and has set aside €6.7 billion to cover costs. That resulted in the company posting its first quarterly loss for 15 years, of €2.5 billion in October 2015.
With the lawsuits piling up, experts say the final costs for VW are likely to be much higher than that.
VW global sales fell 2.4% in November 2015 following the emissions scandal, the German automaker announced on December 10.
The total for the 11 months of 2015 was down 4.5% compared with 2014.
The annual tally was likely to fall short of last year’s total as a result.
VW-brand board member Jurgen Stackmann said: “In view of the current challenging situation, I don’t believe VW will be able to make up the gap in the remaining days of the year.”
Volkswagen said it sold 496,100 VW-brand cars worldwide in November.
Sales plunged in Brazil, with a 51.4% fall, and slid by 31.8% in Russia, although economic problems in both countries were largely to blame for those declines rather than the emissions scandal.
The VW brand delivered 6.12 million cars in total in 2014.
The automaker said last week that US sales fell 24.7% in November compared with the same month last year.
Volkswagen group chairman Hans Dieter Potsch said on December 10 that a “chain of errors” led to the emissions scandal and that the entire company was now focused on regaining the trust of customers.
In September, US regulators found that some VW diesel cars had a “defeat device” – or software – to cheat emissions tests.
VW said the situation arose when it decided to launch a large-scale promotion of diesel vehicles in the US in 2005, but found it impossible to meet strict emissions limits in force in that country in time.
Hand Dieter Potsch said: “No business justifies crossing legal and ethical boundaries.”
VW CEO Matthias Muller said he was confident that customers would overcome their reluctance to buy the group’s vehicles in the coming weeks.
VW chairman of the board of directors Hans Dieter Potsch says a chain of errors led to the emissions scandal and that its top priority is winning back trust.
Speaking at a news conference, Hans Dieter Potsch said: “We are talking here not about a one-off mistake but a chain of errors.”
He said Volkswagen would be “relentless in seeking to establish who was responsible” for the scandal.
VW CEO Matthias Muller said it was “fighting for every customer”.
However, he said a massive slump in sales had not occurred in the wake of the scandal.
In September, US regulators found some VW diesel cars had a “defeat device” – or software – to cheat emissions tests.
The automaker said the problem began when it decided to launch a large-scale promotion of diesel vehicles in the US in 2005, but found it impossible to meet strict emissions limits in force in that country in time.
VW said it had agreed steps to improve supervision of engine software development to prevent future manipulation.
Matthias Mueller said it was relatively simple and inexpensive to fix the millions of affected cars, but this had not been possible before, as the technology for the fixes was not available when the cars were built. In any case, the company was unaware at the time that there was a problem.
VW will in future undertake “real-life” tests, which will be checked by both internal and external third parties.
Hans Dieter Potsch said: “No business justifies crossing legal and ethical boundaries.”
He said it was likely that only a limited number of people took part in the deception and said they would not be named as yet, adding that it was impossible to stop misconduct by individuals.
However, he added that the actions taken by the company would make such actions that much more difficult in future.
Law firm Jones Day is conducting an investigation into what happened. That, Hans Dieter Potsch said, was making good progress, but would take some time to conclude.
The cheat device affects up to 11 million VW cars worldwide.
VW has said that far fewer of its cars are affected by inaccurate carbon dioxide emissions and fuel usage measurement than it originally thought.
The automaker now estimates that about 36,000 of the cars it produces each year are affected.
Last month, Volkswagen said an internal investigation suggested that CO2 emissions and fuel consumption had been understated for 800,000 vehicles.
It warned at the time that the problem could cost it about €2 billion.
“Following extensive internal investigations and measurement checks, it is now clear that almost all of these model variants do correspond to the CO2 figures originally determined.
“This means that these vehicles can be marketed and sold without any limitations,” VW said in a statement.
The company suggested its findings meant that the charge was now likely to be lower.
“The negative impact on earnings of €2bn that was originally expected has not been confirmed. Whether we will have a minor economic impact, depends on the results of the re-measurement exercise,” it added.
VW has already put aside €6.7 billion to meet the cost of recalling 11 million diesel vehicles worldwide that were fitted with so called “defeat devices” that circumvented tests for emissions of nitrogen oxides.
The scandal was revealed in September by US regulators, who said the software detected when vehicles were undergoing emissions tests and changed the way they operated.
Investors, who had feared that the CO2 problem could be as large as its “defeat devices” scandal, were clearly relieved by the statement.
VW’s shares, which have fallen almost 30% this year, rose almost 5% after the statement.
VW sales and market share in the EU dipped in October 2015, suggesting that the emissions scandal might have had an impact.
Volkswagen Group’s total EU sales were 0.5% down from October 2014, while market share slipped to 24.9% from 25.37%.
The data from the Association of European Carmakers (ACEA) also showed a slowdown in EU growth as a whole.
Just more than 1.1 million cars were sold in the EU last month, up 2.9% on last year but 9.8% down on September.
Analysts suggested that buyers may been put off purchases while they await the outcome of investigations into the VW scandal, in which it was discovered that Europe’s largest automaker was falsifying emissions tests.
VW’s mass market brands suffered falls in sales last month, with Seat sales down 11.4%, Skoda’s down 2.6%, and the carmaker’s own-brand vehicles down 0.2%.
However, premium brands Audi and Porsche recorded healthy growth in the EU, with sales last month rising 4.1% and 13.9% respectively.
For the first 10 months of the year, EU new registrations were up by 8.2% to 11.523 million vehicles.