Volkswagen Fix Rejected by California Board as Setbacks Grow

Volkswagen AG’s work to overcome the emissions-cheating scandal was set back after the California Air Resources Board rejected its proposed engine fix as “incomplete,” just a day before Chief Executive Officer Matthias Mueller meets regulators to discuss ways out of the crisis.

“Volkswagen made a decision to cheat on emissions tests and then tried to cover it up,” Mary Nichols, chairwoman of the state board, said Tuesday in an e-mailed statement. “They need to make it right”

The rejection closely followed a bumble by Mueller, who in a Sunday interview appeared to dismiss the crisis by saying Europe’s largest automaker “didn’t lie” to regulators about what amounts to a “technical problem.” The timing couldn’t be worse: VW also is in the midst of complex technical talks with the California board counterparts at the U.S. Environmental Protection Agency about possible fixes for about 480,000 diesel cars with 2-liter engines.

On its website, the California board said it “determined that there was no easy and expeditious fix for the affected vehicles.” The EPA seconded the idea on Tuesday, saying it agreed with the state regulator that VW’s plan can’t be approved.

The German automaker reiterated Tuesday that it’s committed to cooperating with regulators in California and elsewhere and said it will present a reworked proposal to the EPA tomorrow at the meeting in Washington. California’s rejection related to initial plans submitted last month, VW said. At that time it asked for an extension to submit additional information and data about the diesel engines and turbocharged-direct injection, or TDI.

“Since then, Volkswagen has had constructive discussions with CARB, including last week when we discussed a framework to remediate the TDI emissions issue,” VW said in an e-mailed statement Tuesday.

CARB said it and the EPA will continue to evaluate VW’s technical proposals.

CEO Mueller had apologized Sunday in a speech on the eve of the North American International Auto Show in Detroit. “We know we deeply disappointed our customers, the responsible government bodies and the general public here in the U.S.,” Mueller said. “I apologize for what went wrong at Volkswagen.”

That was the same night he made the controversial comments in an interview with National Public Radio appearing to downplay the company’s role in actively deceiving regulators. On Monday morning, the company asked NPR for a do-over, where Mueller blamed a noisy atmosphere for his earlier comments and apologized again.

Mueller is scheduled to meet with EPA chief Gina McCarthy and members of Congress Wednesday morning in Washington. On Monday evening, Mueller had dinner with Republican Senator Bob Corker of Tennessee. VW has a manufacturing plant in Chattanooga, which is undergoing a major expansion. Corker said VW views the meeting with EPA as “very important.”

U.S. Meetings

“They understand fully the order of magnitude of mistakes that have been made and my sense is they are very committed to resolving this in an appropriate way,” Corker said in an interview Tuesday, before ARB announced it had rejected VW’s recall plan.

The CEO’s appearance in Detroit and in the nation’s capital mark his first trip to the U.S. in his new role as CEO. Mueller, the former head of VW’s Porsche sports-car unit, was named CEO in September after Martin Winterkorn was forced out as the “dieselgate” scandal erupted.

Beyond developing an effective fix for each of the three types of non-compliant 4-cylinder engines, VW must document any adverse impacts on vehicles and consumers. And since the emissions scandal centers on Volkswagen’s use of a sophisticated “defeat device” to skirt regulations, any proposed remedy -- whether that’s retrofitting cars with new parts or revising software codes -- will need to be tested by California technicians before the plan is rolled out to consumers.

Rebecca Lindland, a senior analyst at Kelley Blue Book, said Tuesday that the rejection was not a surprise.

“Volkswagen has been working on an additional potential fix involving the catalytic converter. Those details have not been worked out. The reasons for the rejection involve needing more details and specifications," she said in a statement.

“Today’s actions do not preclude a recall, but allow for a broader array of potential remedies,” the board said in the statement.