Police raid Volkswagen headquarters as probe mounts in Germany, US

Volkswagen Group of America President and CEO Michael Horn testifying before the US House Energy and Commerce Committee's Oversight and Investigations Subcommittee in Capitol Hill on Oct 8, in Washington DC.
Volkswagen Group of America President and CEO Michael Horn testifying before the US House Energy and Commerce Committee's Oversight and Investigations Subcommittee in Capitol Hill on Oct 8, in Washington DC.PHOTO: AFP

BERLIN (AFP) - German police swooped on Volkswagen's headquarters on Thursday (Oct 8), carrying away files and hard disks as the investigation into a massive pollution cheating scandal expanded on both sides of the Atlantic.

Private apartments were also raided in Volkswagen's hometown of Wolfsburg and other cities, prosecutors told AFP, as police sought to secure documents and digital data that could point to those responsible for the deception of global proportions.

The raids came as Volkswagen's US chief Michael Horn faced a grilling before Congress, where he sought to distance himself from the scandal while blaming it on engineers in Germany.

Mr Horn told a committee that he had learned in early 2014 that the group's ostensibly environmentally friendly diesel cars breached pollution rules.

But he said he did not know until last month that "defeat devices" had been installed deliberately in the vehicles to help them cheat US pollution tests.

When the emissions problem was first discovered by US university researchers last year, he said: "I had no understanding what a defeat device was. And I had no indication whatsoever that a defeat device could have been in our cars."

The world's largest automaker sank into the deepest crisis of its history after revealing last month that it equipped 11 million diesel VWs and Audis with software that switches the engine to a low-emissions mode during tests.

The software then turns off pollution controls when the vehicle is on the road, allowing it to spew out harmful levels of toxic gases.

The revelations have wiped more than 40 per cent off Volkswagen's market capitalisation. The company risks billions of dollars in fines and lawsuit damages in several countries, as well as being forced to pay for fixes and to compensate dealers.

The group has set aside €6.5 billion (S$10.2 billion) in the third quarter over the affair, but that would only likely cover repairs of affected vehicles.

The auto giant's Australia business on Friday announced a voluntary recall of more than 97,600 vehicles, including Audi and Skodas, fitted with emissions-cheating technology.

In the US, the company could be fined up to US$18 billion (S$25 billion) by the Environmental Protection Agency alone.

"This is a whole lot of money, I'm quite sure," Mr Horn told US legislators when asked about the costs of the fraud.

One congressman, Mr Peter Welch, blasted the company, labelling it "the Lance Armstrong of the auto industry," after the champion cyclist shamed and banned for doping.

In Germany, prosecutors from Lower Saxony said raids were carried out to secure data that "can provide information about the exact conduct of company employees and their identities in the manipulation of exhaust emissions of diesel vehicles".

Several people are targeted in the probe, according to a spokesman for the prosecutors, Ms Julia Meyer.

Volkswagen confirmed that it had handed over documents to prosecutors, adding that the company would provide the necessary support to the probe.

A spokesman said it was "also in the interest of Volkswagen" for there to be "a prompt and thorough explanation" of the scandal.

Volkswagen's new chief Matthias Mueller has said four employees have been suspended, adding however that he did not believe that top management could have been aware of the scam.

He said in an interview published on Wednesday by the Frankfurter Allgemeine Zeitung that engine development is "a complex process" and that these were tasks in which "a director is not directly involved".

Mr Horn too said on Thursday that it was not a decision of top management to install the defeat devices. It was a "couple of software engineers who put (the devices) in", he told US lawmakers.

German media reported on Thursday that Volkswagen had not only deliberately done that for the US market, but had also intentionally sought to cheat emissions tests in Europe.

"Without the cheating software, the affected cars would not have been authorised under the Euro 5 emissions regulation," said the newspaper Sueddeutsche Zeitung.

A VW spokesman said whether the defeat devices were activated in Europe was still the subject of investigations. He added that it remained "legally unclear if the device was forbidden under European rules".

Under questioning by US legislators over plans for the affected vehicles, Mr Horn said the company plans to fix the cars carrying the devices, rather than replacing them.

He said for those of the most recent model years, the problem requires adjusting the software, which can be done by mid-2016, but for 430,000 vehicles, it could take more than a year.

"Our plan is not to buy back the inventory. Our plan is to fix the cars," he said.

In Germany, Volkswagen submitted plans on Wednesday that said it would begin recalling affected vehicles from January, but admitted that it would complete the refitting only by the end of 2016.