Reports: Volkswagen Could Face $18 Bln EPA Fine

(RTTNews) - German automaker Volkswagen AG (VKW.L, VLKAF, VOW.BE) could face penalties of up to $18 billion after being accused by the U.S. government of installing software to defeat emissions controls on nearly half a million diesel vehicles sold in the U.S. since 2008, according to media reports on Friday.

The U.S. Environmental Protection Agency or EPA has alleged that Volkswagen used software, dubbed a "defeat device", on these vehicles that turned off emission controls during all normal driving conditions and turned the full emissions controls on only during an emission test.

Based on the 482,000 diesel passenger cars sold by Volkswagen in the U.S. since 2008, the automaker could reportedly face a penalty of 37,500 for each vehicle found to be in non-compliance, for a total penalty of $18 billion.

The allegations cover the VW Jetta, VW Beetle, VW Golf and Audi A3 of model years from 2009 to 2015, and the VW Passat from model years 2014 and 2015.

The EPA said Friday that it is issuing a notice of violation or NOV of the Clean Air Act to Volkswagen AG, Audi AG and Volkswagen Group of America, collectively referred to as Volkswagen.

The NOV alleges that four-cylinder Volkswagen and Audi diesel cars from model years 2009 to 2015 include software that circumvents EPA emissions standards for certain air pollutants.

According to the NOV, a sophisticated software algorithm on certain Volkswagen vehicles results in cars meeting emissions standards in the laboratory or testing station, but emits nitrogen oxides, or NOx, at up to 40 times the standard during normal operation. The software produced by Volkswagen is a "defeat device," as defined by the Clean Air Act.

California is separately issuing an in-use compliance letter to Volkswagen. Both the EPA and the California Air Resources Board or CARB have initiated investigations based on Volkswagen's alleged actions.

Cynthia Giles, Assistant Administrator for the Office of Enforcement and Compliance Assurance said, "Using a defeat device in cars to evade clean air standards is illegal and a threat to public health. Working closely with the California Air Resources Board, EPA is committed to making sure that all automakers play by the same rules."

The EPA said it is incumbent upon Volkswagen to initiate the process that will fix the cars' emissions systems. However, the agency added that owners of cars of these models and years need not take any action at this time.

VLKAF closed Friday's trading at $181.17, down $6.38 or 3.40 percent on a volume of 209 shares.