U.S. Volkswagen hearing will have implications for industry, EPA

WASHINGTON (Reuters) - Volkswagen’s top U.S. executive on Thursday will field questions from U.S. lawmakers on how the automaker managed to evade pollution rules, kicking off a congressional probe into the scandal and whether other automakers might be implicated.

A logo of Volkswagen is seen on a wheel of a Golf TDI parked at a dealership in Seoul, South Korea, October 5, 2015. REUTERS/Kim Hong-Ji

But the high-profile proceedings will also scrutinize the U.S. Environmental Protection Agency's failure to identify Volkswagen AG's VOWG_p.DE admitted cheating strategy for years, lawmakers and aides told Reuters.

Any issue with EPA’s operations could lead Congress to request independent government inquiries of the agency by the watchdog Government Accountability Office and the EPA Inspector General, the aides said.

“The first thing is to look at the Volkswagen issue, in and of itself. Second is to ask the same question of other carmakers and see if there is any such activity taking place,” said U.S. Representative Marsha Blackburn, the Tennessee Republican who is vice chairman of the House Energy and Commerce Committee.

Any evidence that other auto manufacturers have also used so-called defeat devices to evade EPA emissions standards could prompt lawmakers to consider legislation to tighten EPA test procedures, according to aides.

But Thursday’s proceedings, which formally kick off the congressional probe, will focus specifically on the case of Volkswagen, Germany’s largest carmaker.

Volkswagen America’s President and Chief Executive Officer Michael Horn will testify alone and under oath before the panel’s oversight and investigations subcommittee.

The lawmakers will also evaluate whether the current U.S. environmental regulations are too strict for companies to comply, when questions turn to a second panel including two senior EPA officials - Christopher Grundler, director of the Office of Transportation and Air Quality and Phillip Brooks, director of the Air Enforcement Division.

“If the standards are too strict for diesel cars, we’ll have to figure that out,” said Representative Diana DeGette of Colorado, the top Democrat for subcommittee.

The Volkswagen scandal, which affects about 480,000 vehicles in the United States and 11 million worldwide, has sent tremors through the global auto industry, while slashing nearly 40 percent of the German carmaker’s market value and raising the prospect of massive job cuts for Volkswagen’s workforce. [ID: L8N1261MI]

The carmaker also faces numerous official investigations worldwide and lawsuits from U.S. states and consumers over its admission that it used a device that reduced emissions only when a vehicle was being tested.

Knowing how the defeat device worked could help investigators determine how easily other automakers could evade regulatory scrutiny.

“We still don’t know how this switch works,” DeGette said. “We have a lot of questions. We have very few answers.”

Aides say the company has also been slow to respond to committee requests for documents on the scandal, possibly because of internal turmoil. Volkswagen officials were not immediately available to comment.

“The message to Volkswagen is that you don’t want to mess with us on this one,” said one congressional aide, who noted the committee’s powers to subpoena information.

Current emissions requirements for new cars have been required since model year 2009, when Volkswagen said its vehicles equipped with the defeat device software began rolling off the production line. The standards require manufacturers to reduce fleet-wide nitrous oxide emissions by 88 percent to 95 percent, depending on the type of vehicle.

Blackburn said that once the committee can determine a “root cause” for the cheating strategy, lawmakers could try to determine whether EPA regulations are appropriate and “make a determination about what is helpful and what is not.”

“Once you hit that tipping point where there are so many regulations on the books that they can’t get to all of them, they end up doing nothing well,” Blackburn said.

Reporting by David Morgan, Editing by Soyoung Kim and Christian Plumb