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Volkswagen's U.S. chief blames emissions scandal on 'individuals'

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(Reuters) — Volkswagen's cheating on emissions with the use of software in diesel cars was not a corporate decision, but something that “individuals did,” its U.S. chief executive told lawmakers on Thursday.

Michael Horn, Volkswagen's U.S. president and CEO, testified under oath to the House of Representatives Oversight and Investigations panel about the emissions scandal that has wiped away more than a third of the company's market value and sent tremors through the global auto industry.

“This was a couple of software engineers who put this in for whatever reason,” Mr. Horn said about the software code called defeat devices, which the company put in diesel cars since 2009 to cheat government tests of emissions harmful to human health.

“Some people have made the wrong decisions in order to get away with something that will have to be found out,” Mr. Horn said when asked by lawmakers if Volkswagen cheated with defeat devices because it was cheaper than using special injection systems to cut emissions.

Volkswagen used different defeat devices in Europe and the United States, Mr. Horn said, as emissions standards are different in the two regions.

Raid in Germany

The German automaker has suspended 10 senior managers, including three top engineers, as part of its internal investigation. The scandal, the biggest business crisis in Volkswagen's 78-year history, has also forced the ouster of long-time CEO Martin Winterkorn.

Earlier on Thursday, German prosecutors raided Volkswagen's headquarters and other offices as part of their investigation into whether the company also cheated tests in Europe. Volkswagen said it was supporting the investigation and had handed over a “comprehensive” range of documents.

The internal inquiry has found employees began to install defeat devices after realizing a costly new engine would fail U.S. emissions standards, according to sources. Company investigators have found no evidence against the engineers.

Rep. Chris Collins, a Republican from New York, said at Thursday's hearing that he categorically rejected Mr. Horn's statement that using defeat devices was not a corporate decision.

“Either your entire organization is incompetent when it comes to trying to come up with intellectual property, and I don't believe that for a second, or they are complicit at the highest levels in a massive cover-up that continues today,” Rep. Collins said.

Mr. Horn admitted that Volkswagen, even after hearing in the spring of 2014 about an independent study that showed emissions irregularities in two of its diesel cars, told U.S. air regulators that the higher emissions data was the result of technical problems with the tests.

The company told regulators only on Sept. 3 that it was using defeat devices in diesel cars since the 2009 models, Mr. Horn said.

“Now we learn you knew some 18 months ago,” said Rep. Fred Upton, a Michigan Republican, about Volkswagen learning of the study by the International Council on Clean Transportation and West Virginia University. “What did you really do to fix it and come clean, versus simply going along? But ultimately, the saying rings true: cheaters never prosper.”

Mr. Horn said he had “no understanding” of what defeat devices were and only learned of them at a meeting in September that Volkswagen held with U.S. and California air regulators.

Mr. Horn, sitting alone before the committee with folded hands and a furrowed brow, apologized to lawmakers for Volkswagen's use of a defeat device, and pledged to cooperate with the committee. But he offered little new, saying the company's external investigation remains at a preliminary stage.

The fix

Owners of 2009 to 2015 Volkswagen diesel cars have more questions than answers about their vehicles, and many have joined lawsuits against the company. Mr. Horn said fixing the diesel cars will take years and require approval from regulators. A small number of cars is expected to need only a software fix.

Most of the cars would require more extensive changes including possible installation of urea tanks that neutralize harmful emissions and particulates.

Volkswagen is working to obtain conditional approval from the U.S. Environmental Protection Agency and California regulators to begin software fixes in January on some of the 482,000 cars that had defeat devices. Another group of the cars will require fixes that would begin no earlier than mid-2016. But there was no date for fixing the 325,000 oldest “Generation One” cars that need the most repair.

The EPA's Christopher Grundler, head of the agency's transportation and clean air office, told lawmakers he expects Volkswagen to provide options for fixing the cars early next week.

Volkswagen can achieve emissions standards while maintaining performance, Horn said.

Rep. Frank Pallone, a New Jersey Democrat, said Mr. Horn's statements did not give him “much confidence that we're going to see these vehicles get fixed.”