VW to improve software oversight after emissions scandal

[December 10, 2015]    By Andreas Cremer

WOLFSBURG, Germany (Reuters) - Volkswagen <VOWG_p.DE> has agreed steps to improve oversight of engine-software development to avoid future manipulations after its admission of cheating U.S. diesel-emissions tests caused the biggest business crisis in the German car firm's history.

VW said it was also planning to bring in a new corporate structure that would be in place across the entire group by early 2017.

Europe's biggest carmaker launched internal and external investigations in September after admitting to cheating diesel emissions tests in the United States.

"No business justifies crossing legal and ethical boundaries," Chairman Hans Dieter Poetsch told a news conference at the company's headquarters in Wolfsburg on Thursday.

"Even though we cannot prevent misconduct by individuals once and for all, in future it will be very difficult to bypass our processes."

Poetsch said the external investigation by U.S. law firm Jones Day was making good progress but would need time to reach conclusions.

He said Volkswagen would not name any individuals involved on Thursday but it was likely only a limited number of people took part in the deception.

But he added: "We are talking here not about a one-off mistake but a chain of errors."

Chief Executive Matthias Mueller said the crisis was an opportunity for VW to introduce long-needed structural change.

Since the start of this year, the VW group's executive board has brought in six new members, and top management had been changed at seven of VW's 12 brands.

NEW STRUCTURE

He said VW was working on a new company structure to give more power to its regional divisions and brands. Details of the new structure would be drawn up in the first quarter of next year and it would be in place across the group by early 2017.

"As serious as this crisis is, it is also offering us an opportunity to drive much-need structural change and we will use that opportunity," Mueller said.

Up to 11 million cars worldwide have software installed that defeats emissions tests, and the costs to Volkswagen of fixing the cars, paying fines to environmental authorities and dealing with legal challenges are estimated in the tens of billions of euros.

Mueller said it was relatively simple and inexpensive to fix the affected cars, and he was often asked why they had not done it in the first place. The reason was that the technology for the fixes was not available when the cars were built, and the problem was not known at the time.

Mueller said VW was in a "constant and intensive exchange" with US environmental authorities and was making good progress but he did not give details of the remedies VW had proposed.

"We will not allow the crisis to paralyze us," Mueller said. "Although the current situation is serious, this company will not be broken by it."

The scandal forced out VW's long-time chief executive and wiped 13 percent, or 10 billion euros ($11 billion), off its market value. Shares in Volkswagen were 2.5 percent down by late morning.

($1 = 0.9140 euros)

(Writing by Georgina Prodhan; Editing by Harro ten Wolde, James Regan and Giles Elgood)

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