German police swooped on Volkswagen’s headquarters yesterday, 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 on Thursday in Volkswagen’s hometown of Wolfsburg and other cities, 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 faced a grilling before Congress, where he told a committee that he knew more than a year ago that the group’s cars possibly breached pollution rules.
But Michael Horn said he did not know until a few days before September 3 that defeat devices had been installed deliberately in the vehicles to help them cheat pollution tests.
The German car giant sank into the deepest crisis of its history after revealing that it equipped 11 million of its diesel vehicles worldwide with software that switches the engine to a low-emissions mode during tests.
The defeat devices then turn off pollution controls when the vehicle is on the road, allowing it to spew out harmful levels of toxic gases.
The shocking revelations have wiped more than 40 per cent off Volkswagen’s market capitalisation, but the direct and indirect costs are still incalculable as the company risks fines in several countries and possible damages from customers’ lawsuits.
Horn told the congressional committee that although he found out that the emissions of VW diesel cars did not meet US regulations in early 2014, “I was not then told nor did I have any reason to suspect or to believe that our vehicles included such a device.”
“At that point of time, 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.”
Admitting that the company had “broken the trust of our customers, dealerships, and employees, as well as the public and regulators”, Horn apologised, saying: “We at Volkswagen take full responsibility for our actions and we are working with all relevant authorities in a cooperative way.”
In Germany, prosecutors from the state of Lower Saxony said raids were carried out to “secure documents and data carriers that, in view of possible offences, can provide information about the exact conduct of company employees and their identities in the manipulation of exhaust emissions of diesel vehicles”.
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 has suspended more than 10 senior managers, including three top engineers, as part of an internal investigation. It has also hired US law firm Jones Day to conduct an external inquiry.
But some analysts have questioned whether new chairman Hans Dieter Poetsch and new CEO Matthias Mueller, both company veterans, will introduce the sweeping changes in business practices they think are necessary to restore Volkswagen’s reputation.
Poetsch said on Wednesday it would take “some time” to get to the bottom of the matter. The company, controlled by the Piech-Porsche clan, is not drawing on outside restructuring experts to help with its plans for a new company structure, one source close to the board said.
“There’s a strong tradition to handle such matters in-house,” the source said, adding the company was also unlikely to draw on outside experts as it reviews investment plans and steps up cost savings to help meet the cost of the scandal.
Critics say giving top jobs to company insiders could also complicate the clean-up. For example, it would make it hard for the supervisory board to take legal action against the management board because, until he became supervisory board chairman, Poetsch sat on the management board as finance chief.
UBS analysts estimate Volkswagen could face a bill of around 35 billion euros ($55 billion) to refit cars, pay regulatory fines and settle lawsuits, though they also say this is more than factored into the stock price after its plunge.