WASHINGTON/DETROIT Sept 24 (Reuters) - The confession of cheating that's embroiled Volkswagen AG in one of the biggest scandals in auto industry history came on a cool California morning, on the sidelines of an academic conference focused on green transportation. After more than a year of stonewalling investigators, Volkswagen stunned two senior officials with the U.S. Environmental Protective Agency and California's environmental watchdog by admitting the automaker hacked its own cars to deceive U.S. That disclosure on Aug. 21, confirmed by two people with knowledge of the exchange, shows Volkswagen buckled to pressure from environmental regulators almost a month earlier than the scandal was made public. The admission to regulators came after a year during which VW officials insisted to regulators that tests on its diesel cars showing a spike in pollution levels on the road were in error. U.S. officials exposed the deception on Sept. 18, triggering Volkswagen's admission that it had installed software in its cars to detect when they were being tested and alter settings to conceal the true emissions of 11 million cars sold worldwide. The delay between VW's confession and the U.S.
18 billion, class action and other lawsuits that could add billions of dollars more in liability and a U.S. VW's leadership is in turmoil after chairman Martin Winterkorn was forced to resign and sources said other executives including the head of U.S operations were soon to follow. At first, regulators were surprised that Volkswagen would make its confession at the conference, held in Pacific Grove, California. Minutes before Christopher Grundler, director of the EPA's transportation and air quality office, was to deliver a 9 a.m. Volkswagen representative told him about the deception. At the same meeting, representatives of the California Air Resources Board, a state agency that had been pushing VW hard, were also given a verbal notice of the deception, people with knowledge of the events said. Volkswagen declined to comment on the sequence of events described to Reuters. It isn't clear who the VW representative was who delivered the news of the deception to Grundler and the CARB. Stuart Johnson, head of VW's engineering and environmental office in the United States, was registered to attend the Aug. 21 conference, which was organized by the University of California, Davis.
Johnson, who still works for VW in Auburn Hills, Michigan, did not respond immediately to a request for comment. Norbert Krause, who was head of VW's U.S. 2009 and who retired from VW in 2011, said nobody at Volkswagen of America was involved in the process of engineering the diesel cars. Krause said when reached by telephone in Germany. A formal acknowledgement of the deception came on Sept. 3, when the EPA and California officials held a conference call with Volkswagen executives in Germany and the U.S. During the call, the automaker went over written details provided to the participants explaining how software used in its diesel cars was able to manipulate emissions tests in the United States. That admission came after the EPA threatened to withhold approval for the company's 2016 Volkswagen and Audi diesel models, according to a letter sent by the EPA to Johnson and VW's attorney. The letter detailed some of the timetable of the EPA's actions.
So ended 15 months of back-and-forth between Volkswagen and U.S. California regulators who had come to suspect that the diesel engines were producing higher nitrogen oxide emissions during normal driving conditions than what was certified by the EPA and California, people involved said. Nitrogen oxide emissions have been linked to smog and acid rain. Volkswagen had heavily marketed what it called "clean diesel" engines starting in 2008 with the 2009-model Jetta TDI. It appeared to have found a sweet spot between high-performance and fuel-efficiency with a zippy, fun-to-drive car that topped 40 miles per gallon in highway driving. Krause said in a September 2008 presentation to U.S. Krause and other VW officials promised a diesel that would meet pollution laws in all states, including California where diesel engines had long been associated with smog and cancer-causing soot. By that point, VW and other automakers had lobbied for almost a decade for regulators to give diesel another chance. In 2000, VW and other companies with an interest in promoting diesel, including Mazda, formed the Diesel Technology Forum to lobby for increased use in the United States as a way to reduce reliance on imported oil.
