Slowly, Volkswagen's Bad News Continues to Emerge

By John

VW has apparently admitted to regulators that all of the 3.0 liter TDI diesel engines sold in the U.S. since 2009 contain "defeat devices." The engines were offered in VW, Audi, and Porsche models. Image source: Volkswagen.

Volkswagen's emissions-cheating scandal just keeps getting worse. The latest revelation: Every diesel-powered VW, Audi, and Porsche sold in the U.S. since 2009 contained some sort of emissions "defeat device," the California Air Resources Board (CARB) said late on Friday.

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Also breaking at the end of last week: Volkswagen is close to closing on a 20 billion euro ($21.3 billion) bridge loan, according to a Wall Street Journal report.

The list keeps getting longer The original allegations by CARB and the U.S. Environmental Protection Agency (EPA) back in September concerned 2.0 liter "TDI" four-cylinder diesel engines in Volkswagens and Audis starting with the 2009 model year. VW admitted that all of those (about 482,000 cars in the U.S.) had software that turned off some of the engines' emissions controls when the car wasn't being tested, presumably to improve performance and fuel economy.

That's called a "defeat device" and it's illegal under the Clean Air Act. On Nov. 2, the EPA issued a second Notice of Violation, alleging that VW included defeat devices in models equipped with a different engine, a 3.0 liter TDI V6 used in larger VW and Audi models, as well as the Porsche Cayenne SUV.

That notice applied to vehicles in the 2014, 2015, and 2016 model years. What CARB said on Friday was that VW and Audi officials told EPA and ARB that the issues raised on Nov. 2 apply to all of the 3.0 liter engines going back to 2009.

That adds another 85,000 affected vehicles to the 482,000 that we already knew about -- and that covers all of the "clean diesel" VW Group models sold in the U.S. starting with the 2009 model year. All of them.

That raises two big questions. First, if VW CEO Matthias Mueller is really committed to full disclosure, why has it taken two months for this information to come out? If we learned anything fromGeneral Motors' massive recall scandal last year, it's that GM CEO Mary Barra's determination to get all of the information out in public as quickly as possible -- no matter how damaging -- was smart thinking. This slow drip of information gives the impression that VW is stalling. That won't help the company's case when it comes time for regulators to determine the size of VW's fines.

It also raises this obvious question: What else is VW still hiding?

VW is raising a lot of money to deal with the consequences We don't know the answers to those questions. But on top of the revelations from CARB on Friday, we learned something else: VW has been working on a very big loan.

The Wall Street Journal report said that VW is working with 13 international banks to secure a 20 billion euro "bridge loan" with a 12-month term. The loan, expected to close by the end of this week, is apparently intended to reinforce VW's balance sheet and ease concerns about the company's creditworthiness. The news followed VW's announcement that it has cut about 1 billion euros from its 2016 spending plans.

VW's creditors are concerned because of the company's huge potential exposure. VW could be on the hook for tens of billions of dollars in fines, litigation settlements, and other costs related to the diesel scandal (including the costs of fixing all of the cars). VW may even be required to buy back some or all of the affected vehicles in the U.S., a CARB official hinted last week. (That alone could cost $8 billion or more.)

Two months in, too many unanswered questions What exactly did VW do wrong and how much will it cost?

Those are the two questions we've been asking since the EPA announced its first charges against VW back in September. We still don't have complete answers, or even enough to make well-educated guesses. Until we do, I think any investment in beaten-up VW shares is probably unwise.

The article Slowly, Volkswagen's Bad News Continues to Emerge originally appeared on

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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