California rejects VW's recall plan for larger diesel cars

[July 14, 2016]  By Rory Carroll

SAN FRANCISCO (Reuters) - California's chief air regulator has rejected a proposed recall plan from Volkswagen AG to fix 16,000 3.0-liter diesel Volkswagens, Audis and Porsches in the state equipped with devices designed to cheat emissions tests.

The California Air Resources Board (CARB) said on Wednesday the plan to fix the VW and Audi luxury vehicles, which range from model years 2009-2016, was insufficient.

"VW's and Audi's submissions are incomplete, substantially deficient, and fall far short of meeting the legal requirements to return these vehicles to the claimed certified configuration," CARB said in its letter.

The regulator said it will not have enough data at least until December to make a determination on whether a 3.0-liter fix would work for all of the diesel vehicles. If no fix is possible, the company may have to buy back the vehicles, which could add billions to the cost of its buy-backs.

The vehicles include the Volkswagen Touareg, Porsche Cayenne and Audi A8.

CARB's announcement came as a surprise because VW lawyer Robert Giuffra said last month the German automaker believed it could fix 85,000 polluting 3.0-liter vehicles nationwide, and said the fix would not be "complicated."

VW shares ignored the CARB's reaction and were trading up 2.3 percent at 117.6 euros as of 0845 GMT (04:45 a.m. EDT).

A U.S. Environmental Protection Agency spokesperson said the agency agreed that VW has not presented an approvable proposed recall plan for the 3.0-liter diesel vehicles.

A Volkswagen spokesperson said the company continues to work with EPA and CARB to secure approval of a technical resolution.

A spokesman for Audi, which designed and assembled the V6 diesel engines, called CARB's announcement a "procedural step under California state law" that affects recall plans for all 85,000 larger diesel vehicles with illicit software that are on U.S. roads.

Cars drive past a California emissions testing site in Oceanside, California, U.S. on September 29, 2015. REUTERS/Mike Blake/File Photo

Discussions and tests will continue to try to resolve the fate of the vehicles which could take months and experts from VW, Audi and Porsche will resume talks with U.S. regulators later this month, a source at VW in Germany said.

A key question in the talks is how to bring the V6 engines into compliance with U.S. law after turning off the so-called auxiliary emissions control devices (AECD) which Audi didn't disclose to U.S. authorities, the source said. U.S. regulators view one of those devices as a defeat device.

Volkswagen last month reached a settlement worth up to $15.3 billion with regulators and owners over its 2.0-liter diesel vehicles that were also equipped with the devices that covered up the vehicles' true output of air pollution. That included up to $10.033 billion to buy back as many as 475,000 polluting 2.0-liter vehicles.

(Reporting by Rory Carroll; Additional reporting by David Shepardson in Washington and Andreas Cremer in Berlin; Editing by Leslie Adler and Adrian Croft)

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