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California Just Told VW To Try Again. Rejects Diesel Fixes As “Inadequate.”

by Gregson Mathe 14 July, 2016, 2:55 pm 265 Views 1 Comment

Back to the drawing board, eh VW?

After the Volkswagen dieselgate fiasco, VW heads hurriedly scuttled into a board room and yelled, “SHIIIIIIIIIIIIIIIIIIIIIIIIT!” Then they came back out, went into another board room, and tried to fix it all. At least that’s how I imagine it happening, but it doesn’t matter what I think no matter how cartoon-funny it may be. What matters is how VW will implement these changes and if they will be accepted by the governing bodies that called them out, not to mention the general public whom VW needs to court to win back trust.

They might be running back into that first board room again after learning that California effectively said, “Try again.”

Volkswagen AG suffered a setback in its efforts to emerge from the 10-month-old emissions-cheating scandal as California regulators rejected a recall proposal for 85,000 diesel-powered vehicles, raising the prospect that the German carmaker will have to buy them back.

The manufacturer’s plan for fixing Volkswagen, Audi and Porsche models equipped with 3.0-liter engines rigged to cheat on emissions tests was inadequate, the California Air Resources Board said Wednesday in a statement. The regulator, along with the U.S. Environmental Protection Agency, will continue talks with Volkswagen in hopes of finding a fix, CARB said in letters dated Wednesday to Volkswagen executives and attorneys.

“It seems that a buyback is a definite possibility if there’s not a solution that makes them street legal,” Kelley Blue Book senior analyst Rebecca Lindland said via e-mail.

85,000 is not an insignificant amount of cars even to a mega company like VAG. Even if these cars were only $20,000 each (they aren’t, that’s just a number we’re using for this example, that would come out to exactly 1.7 billion dollars. Yes, the car industry makes a lot of money. Fact. The buyback is not confirmed yet, but it could boil down to that if VW doesn’t get their act together.

Of course, VW downplayed the significance of this, but we all know that it’s a pretty big deal.

Volkswagen downplayed the risk. The CARB announcement was a procedural step under state laws governing recalls, spokeswoman Jeannine Ginivan said in an e-mailed statement.

“We continue to work closely with the U.S. Environmental Protection Agency and CARB to try to secure approval of a technical resolution for our 3.0-liter TDI vehicles as quickly as possible,” Ginivan said.

Volkswagen rose 2.4 percent to 117.65 euros at 1:36 p.m. in Frankfurt. That pared the stock’s decline this year to 12 percent, compared to a 7 percent drop in the benchmark DAX Index.

Time will only tell if VAG can recover from this in full in the US market. Globally they’re still an unstoppable force, but this who mess isn’t boding well for a company that has had a negative stigma in America for the past 40+ years.

(Source: Bloomberg)