Business & Real Estate

California Air Resources Board rejects Volkswagen recall plan

A state technician prepares to test the diesel emissions of a 2013 Volkswagen Passat at the California Air Resources Board’s lab in El Monte last September.
A state technician prepares to test the diesel emissions of a 2013 Volkswagen Passat at the California Air Resources Board’s lab in El Monte last September. New York Times

Ramping up the pressure over the Volkswagen diesel scandal, California regulators Tuesday rejected the automaker’s proposal for recalling thousands of cars rigged to circumvent state and federal air-pollution standards.

The California Air Resources Board, without going into details, said Volkswagen’s recall plan was too vague and slow. Among other things, the agency said Volkswagen hasn’t explained exactly how the proposed repairs would reduce emissions and what impact the fixes would have on fuel economy and vehicle performance. The agency said Volkswagen also didn’t provide “a sufficient method” for obtaining vehicle owners’ names and addresses; the plan also fails to fix the cars “in an expeditious manner,” it said.

The U.S. Environmental Protection Agency seconded the decision, announcing in a terse statement that it agrees with the California air board that the plan doesn’t work. The announcement came one day before the top executives of Volkswagen and the EPA are set to meet to discuss the recall.

Besides rejecting the recall plan, the California agency slapped Volkswagen with an official “notice of violation.” That could enable regulators to pressure the German automaker into taking steps beyond repairing vehicles, including repurchasing cars from their owners, said agency spokesman David Clegern.

“It moves us out of an administrative mode to an enforcement mode,” Clegern said. “It gives us more options. We could discuss buybacks with them.”

Another possibility is having Volkswagen move more quickly to develop electric cars or take other steps to reduce air pollution, as a way of compensating the state for the excessive emissions caused by the diesel cars, he said.

Automotive analyst Karl Brauer of Kelley Blue Book said he thinks Volkswagen would have to offer attractive buyback terms, as well as “a good deal” on a replacement, to get owners to unload their cars.

Based on feedback from Volkswagen owners, Brauer said most “aren’t interested in bailing on Volkswagen” despite their anger. He added that he thinks Volkswagen, the EPA and the California air board could be closer to agreement on a recall plan than the latest rhetoric suggests.

Volkswagen handed federal and state officials a plan in mid-December for recalling 480,000 diesel cars sold in the United States since 2009, including more than 75,000 sold in California. The plan hasn’t been disclosed to the public, but the EPA hinted a week ago that the plan wasn’t adequate when it filed a lawsuit against Volkswagen demanding billions of dollars in damages.

In a letter to Volkswagen Group of America Inc. executives in Michigan and Virginia, the California board said the carmaker’s proposals “are incomplete, substantially deficient, and fall far short of meeting the legal requirements to return these vehicles to the claimed certified configuration.” The agency added that Volkswagen in December asked for “substantial additional time to submit complete recall plans.” Such a request “is not acceptable,” said the agency’s letter.

The air resources board also sent Volkswagen a confidential letter outlining in greater detail the alleged shortcomings of the company’s recall proposal.

The carmaker has already admitted that it implanted the cars with “defeat device” software that activated the emissions-control systems only when the cars were undergoing emissions testing. The software shut off the controls when the cars were driven on the road. Automotive experts say the pollution controls can hurt fuel mileage and overall vehicle performance, such as handling.

“Volkswagen made a decision to cheat on emissions tests and then tried to cover it up,” said Mary Nichols, chair of the California board, in a prepared statement announcing the rejection of the recall plan. “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. Today’s action is a step in the direction of assuring that will happen.”

In a separate statement, the EPA said it “agrees with CARB that Volkswagen has not submitted an approvable recall plan to bring the vehicles into compliance and reduce pollution. EPA has conveyed this to the company previously.”

Volkswagen said it continues to work with the federal and state regulators to find a workable plan. The carmaker said it met just last week with California officials on “a framework to remediate the ... emissions issue” and will proceed with a previously scheduled meeting Wednesday with the EPA.

Speaking at an event prior to the Detroit auto show, Volkswagen Chief Executive Matthias Müller told The Wall Street Journal on Monday that he plans to present EPA Administrator Gina McCarthy a “package solution” for fixing the defective cars.

“We are hoping for a good result from the meeting,” he said.

Dale Kasler: 916-321-1066, @dakasler

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