About before. In may of 2014, independent researchers published a report that identity higher than expected emissions which prompted investigations by the ep epa. When did vw first become aware of this researche. End of april, when it was published. I got it in may, i got information about this. What steps did vw take to evaluate the conclusions of the research at that time. First of all, to acknowledge that emission violations or higher emissions are not legal. Secondly, the engineering departments were supposed to recheck those testing results on our own equipments in order to validate this. And thirdly, to correct this with the respective software actions which have been implemented at the end of last year . Who implemented this, and who was responsible for it . Indeed the Software Applications management are being done in germany at the engine and drive Time Department within the research and development division. Okay. The epa describe a series of presentations or discussions with vw in the wake of the research in may of 2014. Who for vw was interacting with epa . Were those individuals part of vw america or vw ag, or both . Thats something i would have to check. Maybe this is also in the records provided to you next week. Okay. Great. What did vw america understand about the cause of the higher emissions between may of 14 and the voluntary recall in december of 2014 . What did your team at vw america know what is going on . That they have to my understanding validated those test results and are developing somewhere fixes in order to get this back in line. And three different tech top versions, which i didnt understand, to be honest, in order to bring this in the car. But also, as i said, all these things are vetted through the Product Safety Committee, which is worldwide responsible for this, and which is also looking at the traffic, for instance. In this context, i trusted those guys, and those processes, that everything was according to the book 100 . Okay. So at that time nobody in vw america knew that there was cheating going on in the Software Design . To my understanding, no. Then in december of 2014, vw conducted a voluntary recall that at least in part sought to address the higher onroad emissions in the model year 2009 through model year 2014 vehicles that were subject to the allegations. Would you explain what you understand this recall was intended to do . To correct the studies i mean, the results of the study of the university of West Virginia, our retesting to bring the cars, all the cars back into compliance. Okay. But that fix to the emissions problems that was implemented as part of that recall didnt resolve the issue of higher onroad emission. So the question is who was responsible for implementing that in december of 2014 . Same engine and drive Train Division within the Engineering Division in germany. What role did vw of america have in developing or validating that solution . We just have this office who do the applications. Theres also testing facility in oxnard in california who also help those folks in testing. But to my understanding, dyno testing as far as the legal situation is concerned. To be clear, vw america played no part in development of the solution. No. Okay. It may have helped validate the solution. I dont think so. You dont think so. Okay. And at that time did you or anyone in vw of america have any knowledge of the alleged defeat device . At which point of time . December 2014 when you were beginning the rollout of the recall solution, did you ever have any knowledge. No. Anybody in vw of america . My understanding, because otherwise i would have hoped they would inform me about this. Thank you. I yield back. I now recognize ms. Clark of new york for five minutes. Thank you, mr. Chairman. And i would like to think you, m to thank you, mr. Horn, for giving us as much background and knowledge of what has taken place to the best of your ability. Ive heard a couple of my colleagues on the other side of the aisle refer to what has occurred as cheating. But i would like to say to you that i believe it was an intentional deception. And i think we need to say it as it is. This wasnt a game. This was an intentional deception to bring something on the market that did not meet standards. I want to go back to something my colleague just raised about your Testing Center at oxnard. I understand that for the better part of the past year, vw was interacting with c. A. R. B. About discrepancies about high emissions involving your vehicles. What is the purpose of the oxnard facility, and is it, as the article suggests, developed to hem volkswagen meet emissions standards . To my understanding, yes. And its directly connected to the research and Development Department in germany to help them or to get the cars into Legal Compliance and to the u. S. Standards. How many employees are there . Oh, i would have to guess this. Okay. If you could just provide us with that. What was the role of the oxnard facility in understanding the test results presented by c. A. R. B. Showing unexpectedly high emissions . At this point in time i cant answer this. I dont have the understanding. I only know our department in auburn hills was interfacing with c. A. R. B. And epa for compliance for the applications and everything. You mention auburn hills. What is the role of that office . Excuse me . What is the role of the auburn hills office . To work directly on a working level, on a management level, with epa and c. A. R. B. Do the oxnard and auburn hills facilities Work Together . Now, yes. There is a structural change in terms of so prior to the unveiling of this deception, they were separate intents, they didnt interface . I think they worked together. My explanation is about the structural situation of these facilities. And they are now under one roof. Okay. But they collaborate . I hope so. Because my concern is that if we have these facilities designed specifically to address the issues of emissions of testing, and they failed, that speaks to a whole nother level of perhaps collusion with respect to this whole software debacle. Have you looked at or done any internal investigation with respect to these facilities . Thats part of the internal investigation. But my understanding is that just testing on the bases of the legal test requirements. So the engineers wouldnt have known Software Code, is that what youre saying . I think theyve tested the dyno situation for the cars and they didnt do independent road tests. Thats what i allude to. Okay. Let me jump to the whole idea of the environmental impact. How seriously does volkswagen take its commitment to the environme environmental responsibility . Maybe its difficult to understand now in this context, but its deeply embedded in our corporate culture. We have three values, responsible to our employees and the environment. Our plant in tennessee is a platinum l. E. D. Certification. This is the most clean and Energy Efficient plant in the world. And all of our plants have a commitment to reduce Carbon Footprint by 25 in 2018. And whether these plants are in india, newly built in china, theyre always up to our really to the highest volkswagen standards, which go beyond sometimes the national standards. So this is part of the corporate culture. Yes. Im assuming this is throughout your engineers and scientists, this is sort of the ethos. How do you explain this deviation, a massive deviation . Myself and the majority of volkswagen employees, which is 600,000, ask the same question, ask the same question. And its a relevant question. And i hope that these investigations will definitely find out the what drove those people, beyond newspaper articles and what would he read o what we read out there. I hope it wont be profits. Thank you, mr. Chairman. Mr. Horn, these vehicles promised unrivaled fuel economy and performance without the knox emissions usually associated with diesel. I know other members have asked about how volkswagen intends to make consumers whole. I want to lend my voice to that briefly, because consumers and people in my district purchased the car believing it would be a clean, environmental friendly choice, they have every right to feel defrauded. Consumers were sold a bill of goods that simply does not exist. And i think it is likely that whatever fixes to comply with emissions standards will hurt the vehicles performance in other ways. This is not what consumers thought they were buying. And it is not what dealers thought they were selling. Were still the resale value on these vehicles, which i am sure was a selling point, has been destroyed. Volkswagen has a lot to think about, i believe, in terms of how it depends to make right by consumer. Let me ask, typically, when deciding whether to issue a recall and develop a solution, does volkswagen conduct its own emissions testing . Yes. And did you try to recreate or confirm the results of the icct study from may of 2014 . I cant speak to this, what they specifically tested. In july 2014 i was informed that they have basically acknowledged the testing results and were developing those fixes in order to bring those cars back into compliance. A lot was said about defeat devices. And were talking about a defeat device here. Has the volkswagen operations been impacted by defeat devices in the past . I have in the context with after september 3rd, understood there was an issue for instance here in 1974, yes. Thats what i understand. And so what measures were taken by the company to make certain that there was better scrutiny, better oversight of the potential for defeat device application . At that point of time, thats a great question. And you cant get you the answer now. But was something done . In 1974, i was 12 years old. I dont know. History is history. We missed some of that, so we reach to the books and read about it. What was done, if anything, to address defeat device application . And i think the investigations will go back into this time. I dont think we need to investigate that. Did a corporate measure get put into play to address defeat devices . Back then, i dont know the answer now, sir. I would hope you could provide that to the committee. Im certain the record will be open. And if i could just confirm some of the information weve received, volkswagen initiated a voluntary recall in 2014 that was intended in part to address the issue of excess knox emissions; is that correct . Excuse me. Could you repeat the question . Volkswagen initiated a voluntary recall in december of 2014 . Yes. Who at volkswagen proposed the recall . The Technical Engineering Department in conjunction with the Product Safety Committee worldwide, which is steering all the recalls and campaigns and voluntary recall actions centrally for all markets. And what explanation was given to consumers about why that december 2014 recall was necessary . I would have to look into the document on how we what we wrote to those consumers. I dont know now. You will provide that to the committee, please . Definitely. Its public. Its public anyhow. Gsa has this as well. What explanation was given to regulators but why that recall was necessary . Thats also something we will have to provide with the documents. What fix did the volkswagen organization implement for cars brought in under that recall . All have been software fixes. New Software Versions have been flashed into the specific steering, onboard steering units. And who at volkswagen developed that fix. The engine and drive Train Development software after treatment departments in germany. And did they know at the time that it would not work . I dont know that. My understanding was it would work, and also the Safety Committee wouldnt have released this version for application in the markets. Well, i thank you for your responses. I look forward to the Additional Information you owe. And again, i would say on behalf of the consumers of the 20th Congressional District of new york, those of the country, and around the world impacted by this, deserve a sound explanation and a fix that will respond to the environmental damage done here and the consumer fraud. Yes, sir, thank you. Thank you. Ms. Deguette has one final question. I ask unanimous consent to put mr. Welchs document into the record. So ordered. Mr. Horn, you told a whole bunch of us on this committee that after that West VirginiaUniversity Study in may of 2014, everybody was running around trying to figure out what was going on with these cars and why there was a discrepancy between the tasks, that your engineers didnt know the answer. But in fact, the discrepancy was because of a willful act of some engineer in germany in the first place, correct . Thats my understanding, yes. And those people, that information about that discrepancy never made it to germany so they could tell your people what was wrong, is that what youre testifying to here today . I dont understand what youre trying to say. Well, you said your people were trying to figure out why there was a discrepancy. Right. But there were some people who knew. And those were the people who wrote that deceptive code in the first place. Are you telling me they never told the u. S. People what the problem was and why the discrepancy . The people who investigated the study in detail, the study, and developed the software fixes, were also the colleagues in germany. Of course they were informing their u. S. Colleagues in auburn hills. Did they tell the u. S. Colleagues that there was this deceptive code . I dont think so. Otherwise we would be much earlier here. Thank you, mr. Horn. This hearing is not over. We would appreciate, more questions will be coming from committee members, we would appreciate a quick and honest response to those as well. This hearing is going to add juni going to recess for an a couple of hours while the Republican Caucus is meeting. Well be back. Thank you. So the house energy and commerce subcommittee is in recess now so that republican members can attend a closed door conference vote for House Speaker which is scheduled to be underway at this hour. Media reports are indicating that the meeting may last as late as 2 00 p. M. Your calls and briefings about the election are on our companion network, cspan. Volkswagen here on the subject of this hearing, on cspan 3, has admitted to installing Software Designed to cheat emissions tests in about 11 million diesel cars worldwide. While the cars passed the test, they released nitrogen oxide up to 40 times the level allowed by federal law. The chairman of volkswagen has resigned and the Company Plans to spend about 7. 3 billion to fix the vehicles, including about half a million here in the u. S. Epa officials are due to testify at this hearing later on. Weve been asking how volkswagen should be penalized for emissions cheating. A lot of you have posted comments on facebook and twitter. Several from the cspan facebook page. Albert writes, jail time for the execs who made the decision to break the law. Tammy posted this comment, they should have to replace my car. I was lied to and cheated. From what i have read so far, any change to the software to put the vehicle in compliance will result in lower fuel mileage. And fuel mileage was the number one reason i chose my car. Im stuck with a lemon i cant even sell. John says, by refunding money to people who did not get the economy they were to get. The committee is in recess so the republican members can vote in their speaker election. Well show you this hearing again, testimony by michael horn, president and ceo of Volkswagen Group of america. Thank you and good morning. We now convene this hearing of the oversight and investigation subcommittee on volkswagen emissions cheating allegations, initial questions. Let me start off by saying my first car was a volkswagen, a 76 volkswagen beetle. I learned a lot about cars and internal combustion engines. I could take it apart and put it together and it actually continued to work. It had a legacy as the peoples car, to be peoplefriendly. I loved that car, loved it a lot, not so much as to call it brad, but i loved that car. But i trusted the car to get me around. And i trusted that volkswagen would continue to build a reliable car. That word, trust, alone, as you know, is the key factory in Building Customer loyalty. And that trust is what helped build volkswagen, because we believed the company looked out for customers first. Then just three weeks ago, car owners around the world were shocked to learn that volkswagen ag, the Worlds Largest automaker, admitted it installed software for years in millions of diesel models that effectively defeated emissions controls during driving. This followed the epas public announcement that it had sufficient evidence to support allegations that vw was cheatingen icheating on its emissions tests. The diesel vehicle switched into an operational mode designed specifically to pass the test, then switched back to a different mode during driving, which emitted chemicals at five to ten times the federal limits. In the United States alone, volkswagen and audi models have affected. Worldwide, the software was used in an estimated 11 million vehicles in 7 million vw line seven vw lines. This investigation will seek to understand the facts and circumstances surrounding the vw actions, the impact of its decisions, and related issues about emissions compliance generally. At this mornings hearing well receive testimony from the head of volkswagens american operations, mr. Michael horn, and from an epa official tasked with ensuring that automobiles on american roads meet environmental standards. The subcommittee intends to pursue answers to initial critical questions about troubling revelations about vws actions, what happened, who was involved, and most importantly, why. Let me acknowledge that mr. Horn is appearing before us voluntarily today. And i can say that i expect that he and the volkswagen organization will continue to cooperate with our inquiry. This means providing documents and information to the committee as quickly as possible, including documents that have already been discussed publicly in connection with volkswagens Board Meetings in germany. As i said before, there are a number of core questions well begin to pursue today, both for volkswagen and the epa. Most critically, what happened, who was involved, where were these actions taken, and we also have questions on the impact on customers, familyowned dealerships and the American Public. We hope mr. Horn can provide context for and you say expand on the facts presented in his testimony. We look to find out the understanding of vw officials and were the actions taken to deceive regulators. At some point prior to 2009, vw made a choice to move forward with engines that evidence now suggests were not compliant with u. S. Emissions standards. The Illegal Software was initially deployed in the first generation of these diesel engines which account for approximately 340,000 of the affected vehicles. However, despite apparent advancement in their emissions control systems in two future generations of these engines, the software remained in place. If the technology was improving, what did the company understand about the software cheat, and what does this mean for fixing these vix . Will some be easier than others . Of course for epa we have questions about its compliance and recall programs. I hope we can get some clear answers today from that agency, why did epas standard compliance tests and audits fail to detect problems, especially in Older Technology . What is epa doing to ensure any fix it requires of the automaker does not negatively affect performance . The 480,000 or so vw vehicles represent only 2 of cars on United States highways. So far we have no evidence that the Software Similar to what was used by vw is present in any other u. S. Vehicles. The epas ongoing testing will help us understand this. At root, the behavior to which vw admitted represents a fundamental violation of public trust and reverberations of this violation can be seen across the United States and across the world as people grapple with the implications. We need to develop a clear understanding of the facts and circumstances surrounding this case. And this hearing will be a first important step towards that goal. I now recognize the Ranking Member of the subcommittee for five minutes. Thank you, mr. Chairman. In the spirit of bipartisanship of this investigation, ill tell you my first car was also a volkswagen. It was a 1960 vw beetle with a rag top sunroof that i inherited from my grandmother. I will tell you that i still miss that car. It didnt have any lines of computer code required to operate that vehicle. In this situation, fast forward to today, we know some things but we dont know enough. Thats why im glad that were having this investigation. We know that in may 2014, West VirginiaUniversity Published a study commissioned by the International Council on clean transportation that found that onroad emissions from volkswagens cars were well above vws standards. They also did not match the emissions outputs found under testing conditions. We know that vw tried to justify this discrepancy to regulators with unexpected inuse conditions. We know that in december 2014, vw initiated a voluntary recall of nearly half a million vehicles to resolve, among other things, the emissions issues. Yet when the California AirResources Board tested the fixed vehicles, they found that emissions were still above the legal standards. And we know that by july of this year, the epa and c. A. R. B. Told vw that they would not approve the companys 2016 model year diesel vehicles for sale unless the emissions issues could be explained. Vw was essentially forced to come clean and they ultimately confessed that they had installed a defeat device designed to circumvent epas emission standards for certain air pollutants. We know this defeat device sensed and vehicles were undergoing emissions testing and ensaturd ensured that they would pass. During normal Road Conditions the emissions controls were reduced and the cars were releasing 40 times the nitrous oxide allowed by emissions standards. Mr. Horn, im glad youve come today to testify here. While we know all the things i talked, there are other things, such as how the defeat device affects the engine, why it was installed, and how it was able to evade emissions tests. You havent revealed when and how the engines equipped with this defeat device will be fixed. You havent told us whether this fix will affect fuel economy or performance of the vehicles. You havent revealed what volkswagen told regulators over the last year as epa and the california board were trying to figure out why the vehicles emissions were out of compliance. You havent revealed whether the voluntary recall that vw set in place in 2014 was just merely a ruse. Was the vw group of america actually trying to find out what was wrong with the cars and fix them . Or did vw know that the cars had defeat devices on them and were only trying to buy time with the regulators . You havent revealed who is responsible for this scheme. We dont know if it came from germany and who knew about it in the United States. Weve all seen the press reports, and we can all speculate about what happened here and why. But until volkswagen comes forward with some answers and provides some assurances that we can trust what theyre saying, the American People, the regulators, and congress are all left in the dark. So i hope, mr. Horn, in a youve come prepared to answer some of these questions, and i also hope that vw will be prepared to work with this committee as we move forward. Hundreds of thousands of owners invested money and trust in vw. Many of them bought those cars specifically because they were seeking environmentally friendly vehicles. Now theyre left with cars with much higher levels of pollution. They dont have any answers about when or how their car will be fixed or what kind of car theyll be left with. Earlier this week, i visited a volkswagen dealership in denver. I saw the pollution control equipment on vw diesel vehicles firsthand. These cars account for almost 25 of the sales at that particular dealership and a significant percentage of sales at vw dealerships in colorado and across this country. Now, because they cant sell them, these cars are just sitting on the lots, which is a scene thats being repeated across the country. So, as, mr. Chairman, you say, its a small percentage of all the cars on the road in the u. S. , its a tremendous Economic Impact to these dealers and also to the consumers who dont know whats going to happen to their cars. And so thats perhaps the key answer that im looking for today. What do we do moving forward . Now, mr. Chairman, this subcommittee has been here before. In the last 15 years, weve had ford and firestone, toyota, gm, and takata before this committee. We were able to get information to help us understand what happened. But most importantly, weve used this information to chart a path forward and to help the consumers affected by this event. I hope that volkswagen can similarly tell us today whats happening. And i hope that they will get beyond this series of terrible decisions and do something to restore the public trust. Thank you, and i yield back. The gentlelady yields back. Mr. Upton for five minutes. Good morning. Thank you, mr. Chairman. The ad campaign that swept the nation in the 90s, since then, the vw has enjoyed an almost cultish following. But at some point cheating and betrayal became part of the game plan. Theres a lot we dont know about vws intentions. Regardless of intent, they have betrayed the trust of regulators, dealers, suppliers, and most important, the driving public. Probably the most famous congressional hearing question is what did you know and when did you know it, asked by senator howard baker back in the 70s at watergate. Now we learn that you knew some 18 months ago. So we add, what did you really do to fix it and come clean versus simply going along . Ultimately, the same rings true. Cheaters never prosper. And thats why were here today. We have many questions about how we got here and the road ahead. Why would one of the Worlds Largest automakers go to such lengths to avoid emissions requirements . Who was responsible for such decisions, and why did they, for years, even as technology improved, continue down that path . If they were willing to cut corners here, what else have they done . Will the fix affect the performance of these vehicles . Unraveling these questions will take time. And i dont expect that well discover all the answers today. But if vw is serious about rebuilding this broken trust, its leaders will need to demonstrate a serious commitment to provide transparency, cooperation, and clear, consistent communication not only with this committee, the e pa, but also with its customers, suppliers, dealers, and the general public. Vw will inevitably pay a steep price for this dirty little secret. How it responds to the failure will go a long way to rebuilding or further eroding the publics trust. Vw must also consider what implications these actions have for the thousands of americans that it employs, including their facility in all about burn hiub michigan. Every single one of us in michigan is proud of the tradition thats so closely intertwined with the success of the automobile. In fact michigan has launched its own investigation. All automakers must advance by innovation, not by gaming the system and breaking the law. The committees investigation is just beginning. This hearing is an important step, as we receive documents and information, new details are certain to emerge. I look forward to getting to the bottom of this issue as quickly as possible. I take this very personally. As the author of the tread act, congress was very clear to protect consumers from abuses by automakers, which included steep fines, and yes, criminal prosecution. Vw has betrayed a nation of regulators, loyalists, suppliers, and innocent customers. Its time to clean it up or get off the road. I yield the balance of my time to the vice chairman. Thank you, mr. Chairman. Mr. Horn, thank you for being here. And i think its completely appropriate that you come before the committee, that you apologize for the actions, and that you and vw take full responsibility for what has transpired. It is disappointing. Im fully aware that our governor has been at the chattanooga facility. I know that the governor, the state legislators, the members of the congressional delegation and i are quite concerned about this. Youve got a lot of hardworking, honest tennesseans who were at that chattanooga facility. Were quite concerned about the actions of a few vw employees, not chattanoogans. As chairman murphy has said, its the who, what, when, where, how, and why. Why you did it, how you did it, when you did it, when you knew, who carried this out, where did this take place, did it go across the brands, was it pointed at eu regulations, was it pointed at some of the climate regulations, is the epa too overburdened to have noticed this. This is a systemic, systemic failure. And i will also point out, someone will say its a safety issue. No, sir. This is an issue of integrity. So we appreciate that you are here. We look forward to hearing from you. And i want to yield the balance of my time to the vice chair of the subcommittee, mr. Mckinley. Thank you, and thank you, mr. Chairman, for holding this meeting. Those of you who have talked about your cars, my first was the 1957 volkswagen. I think ive got everybody beat on that. Listen, there should be zero tolerance for this unethical behavior and flagrant flouting of u. S. Laws. People feel in West Virginia that theyve been deceived. On monday there was action taken by the attorney general to file action against this. I also want to just touch on the university, West Virginia university used a fraction of the money we spent with epa to make this discovery. They found out, as you know, that one of the cars that they tested was 15 to 35 times more emissions that they were allowed. Another was five to 20 times more emissions. So, mr. Chairman, i want to touch on the fact that this opportunity that this is an opportunity to show what Research Dollars can do. I look forward to get some clarity as to what this is. I thank you very much and look forward to the conversation. Thank you. We now recognize the Ranking Member of the committee for five minutes. Mr. Chairman, thank you for holding this hearing. Were here today because volkswagen lied. They lied to regulators, they lied to their customers, and they lied to the American People. We all have important questions that deserve answers. What did volkswagen do to its cars, why did they do it, and who knew this was happening, both in germany and in the United States. This whole scheme makes me question how much we should trust volkswagen. And to be honest, this committees investigations over the last five years make me question how much we should trust the Auto Industry in general. Let me remind the committee of the difficult history the American Driver has had with the Auto Industry in recent years. In 2010, this committee investigated toyotas recall of 9 million vehicles worldwide for unexplained cases of sudden unintended acceleration. Dozens of people died in accidents linked to runaway toyota vehicles. Our Committee Held multiple hearings and in the end it was determined toyota knew about certain problems with their vehicles that if fixed early, likely would have saved lives. In early 2014 we launched an investigation into General Motors ignition switches that killed people. We found individuals within gm knew about the defect for nearly a decade before the Company Initiated a recall. Later in 2014, we learned of the exploding takata airbags installed in vehicles made by at least 11 auto manufacturers. The recalls for airbag problems began in 2008, yet takata continued to investigate whether recalls are necessary. And now we have volkswagen, a company that told regulators that their vehicles met emissions standards but had actually installed defeat devices to bypass emissions controls. The Worlds Largest automakers have come before this committee to admit that they have cheated the system and lied to american customers. There seems to have been a per saysi i vasive culture of deception. Americans need to know when they decide to buy a car theyre actually getting what they paid for. The Auto Industry has chosen to perpetuate lies and mislead consumers. The American Public are not crash test dummies and wont be treated as such. Mr. Horn, i understand you wont have all the answers today, but please dont hide behind an internal investigations excuse. Its time for volkswagen to be forthcoming with customers, regulators, and congress. We deserve an explanation. I would like to yield the remaining time. Thank you. Well hear a lot from volkswagen today. Well hear apologize, im sure, for volkswagens deliberate deception of the American People and federal and state Public Health agencies. Well hear a pledge to get to the bottom of this issue without delay and to fully cooperate with investigators. Well hear how the use of socalled defeat devices are incompatible with volkswagens corporate culture. And i want to tell you, mr. Horn, i dont buy it. The American People, the epa, and their counterparts around the world have been defrauded by volkswagen. The companys word isnt worth a dime. The only thing i want to hear today is exactly how will volkswagen make this right by consumers. Saying it will take time to design and implement a fix is insufficient and i think unacceptable. People shouldnt have to wait to get the fuel economy, the low emissions, and performance that they already paid for. If they wanted every volkswagen clean diesel Vehicle Owner should be able to get their money back. All of it. The American People deserve answers. Yes, there are a lot of questions. But there are also thousands of owners of clean diesel volkswagens out there. And what theyre wanting to know is what are you going to do for them and when. And i say now. So i expect those answers to be provided today. And i yield back to the Ranking Member of the full committee. Thank you, mr. Chairman. Unless anyone else on this side would like the time, im going to yield back. I yield back, mr. Chairman. Thank you. The gentleman yields back. I also ask unanimous consent that the written Opening Statements by members of the committee be introduced into the record. Without objection, the documents will be entered into the record. Youre aware that the committee is holding an investigative hearing, and when doing so, has the practice of taking testimony under oath, mr. Horn. Do you have any objections to testifying under oath . The chair advises you that under the rules of the house and the rules of the committee, you are entitled to be advised by counsel. Do you desire to be advised by counsel during your testimony today . Then in that case, would you please raise your right hand and ill swear you in. Stand and raise your right hand. Do you swear the testimony you are about to give is the truth, the whole truth, and nothing but the truth . Thank you. The record should show the witness answered yes. You are now under oath and subject to the penalties set forth in title 18, section 1001 of it United States code. You may now give a fiveminute summary of your written statement. If you will make sure your microphone is on and pulled close to we can hear you. You have to press the button. Is it on . Okay. Right. Thank you very much, chairman upton, chairman murphy, Ranking Members, other members of the committee. Thank you for inviting me here today to testify before the committee. My name is michael horn. I am president and ceo of volkswagen of america, a subsidiary of volkswagen in germany. I come here in an effort to show our commitment to cooperation. We have not had the opportunity to review all aspects of this matter, indeed the investigation is just beginning. Therefore my testimony and my answers to your questions will be by necessity have to be considered preliminary and based on my current recollection and information. On behalf of our company, my colleagues in germany, and me personally, i would like to offer a sincere apology, sincere apology, for volkswagens use of Software Program that served to defeat the regular emissions testing regime. In the spring of 2014, when the west have a University Study was published, i was told that there was a possible emissions noncompliance that could be remedied. I was informed that epa regulations included various penalties for noncompliance with the emissions standards, and also that the agency could conduct engineering tests on their own which could include analysis on defeat devices or other auxiliary equipment. Let me be very clear about this. What i was told about the epa process, i was not then told nor did i have any reason to suspect or to believe that our vehicles included such a device. I was also informed that the Company Engineers would work with the agencies to resolve the issue. Later in 2014, i was informed that a Technical Team had a specific plan for remedies to bring the vehicle into compliance and that they were engaged with the agencies about the process, and you mentioned this also in your statements. On september 3rd, 2015, volkswagen had a meeting with the California AirResources Board and the u. S. Environmental Protection Agency that emissions in diesels for model years 2009 until 2015 contained a defeat device in the form of hidden software that could recognize whether a vehicle was being operated in a Test Laboratory or on the road. The software made those vehicles emit high levels of nitrogen oxides when the vehicles were driven in actual road use. In volkswagens recent ongoing discussions with regulators, we described to the epa and c. A. R. B. That there was a software feature that should be disclosed to and approved by them as an auxiliary control device in connection with the certification process. As a result, in order to show that we act immediately, we have withdrawn the application for certification for all model year 2016 vehicles and are now working with the agencies to continue the certification process. These events, and i fully agree on this, are deeply troubling. I did not think that Something Like this was possible at the Volkswagen Group. We have broken the trust of our customers, dealerships, employees, as well as the public and the regulators. Let me be very clear. We at volkswagen take full responsibility for our actions and we are working with all the relevant authorities in a cooperative way. Im here to over the commit of volkswagen ag to work with this committee, to understand what happened, and how we will move forward. Epa, c. A. R. B. , the u. S. Department of justice, state attorneys general,less and other authorities are fulfilling their duties to investigate this matter and we are determined to make things right. This includes acceptingright. This includes accepting the consequences of our acts, providing a remedy and restoring trust of our customers, dealership, employees, regulators and the American Public. We will rebuild the reputation of a company that more than two Million People worldwide, including dealers and suppliers rely upon for their livelihoods. Our goal is to develop remedy for customers. While much work is still to be done, id like to talk about how we get from where we are now to that goal. Vax thorough investigations have already begun but any Information Development at this stage is preliminary. We ask for your understanding as we complete this work. Second, its important for the public to know that as the epa said, the vehicles dont prevent a safety hazard and remain safe and legal to drive. Third, Technical Teams are working tirelessly to develop remedies if for affected group of vehicles. These will be shared with responsible authorities for approval. We will examine our compliance processes and standards at vo s volkswagen to make sure this cant happen again. Fifth, we commit to regular and open communication with oust r r customer, dealers and employees and the public as we move forward and we have set up a designated service line web site and i have sent a personal letter to ever affected customer. I can outline the path forward of a goal of making right. Nevertheless, volkswagen will be judged not by our words but clearly by our actions over the coming weeks and months. These events are fundamentally contrary to volkswagens Core Principles of proving value to our customers innovation and responsibility to our communities and our environment. They do not reflect the company that i know and to which i have dedicated 25 years of my life. Its inconsistent this Company Involved in this emission issue is the company that invested in environmental efforts to reduce the Carbon Footprint in our factories around the world where our plant in tennessee is the best factory in this respect. In closing, again, i apologize on behalf of everyone at volkswagen, we will cooperate with the responsibility authorities, we will find remedies for our customers and we will work to ensure never happens again. Thank you for allowing me to testify today and i look forward to your questions. Thank you. Thank you. I recognize myself for five minutes of questioning. On september 3, 2015, vw admitted to carb and epa that it installed devices in certain model year 2009 and 2015 vehicles. To the best of your knowledge, did vw install the software for the express purpose of defeating emissions controls . To our understanding, and this is also part of the investigation, it was installed to this purpose, yes. For this purpose. In your written testimony you noted you were made aware of potential emissions compliances in the spring of 2014. Uhhuh. You also noted discussions at the time about penalties for noncompliance and the epas ability to test for a defeat devices. At that time, were you aware or informed that these vehicles contained defeat devices . No. When did you first learn, then, that vw vehicles contained a defeat device . Around the september 3 meeting. Couple of days before. And then why were you having discussions about defeat devices in the spring of 2014, then, if there was no knowledge or at least a concern that these vehicles contained a defeat device . So the university of West Virginia made the study. There was a jetta and a passat in there and another off road vehicle, i dont want to name the brand now and the results were communicated and this context i was told by our experts in the oregon hills office and it was also just four months into this market that of course not complying with emissions standards is relating to fines and hefty spine, specifically here in the u. S. And that those experts, including the German Technology department would check on the study and the Study Results as you also mentioned was a small team. Results have been published with all the emission which is went overboard and that they would check this. Point one. Point two is they would also look and with all the responsible departments and there was a number of experts in germany and then how to possibly fix this. Then there was the notion in this communication that also the epa or the agencies could check also on their own which do my degree is normal around the world that agencies check once in a while on their own for auxiliary devices including defeat devices. At that point of time i had no understanding what a defeat device was and i had no indication whatsoever that a defeat device could have been in our cars. Let me go back, the new chief executive of volkswagen, mr. Mueller, has been quoted saying only a few people were involved with the deception. I have to say that i dont take much comfort in that, especially knowing volkswagen has been known for superb engineers and mechanics who i wonder shouldnt they have picked up on this . But isnt it true the technology was installed in the automobiles initially because the cars could not meet the new stringent emission standards for diesel engines . Yes, to your last question, this appears to be this way and to newspaper articles about possible quotes of mr. Mueller i dont want to quote the investigations are preliminary, then the entire investigations are turned over to a law firm called jones day, american company, which is going through the systems outside advice outside counsel. I think what we find amazing is West Virginia university discovered this and your army of brilliant engineers and talented mechanics didnt know something was amiss. And im sure well have more questions about that. But i want to ask you this. In terms of vw status for remedy of these defeat devices, whos responsible for developing and testing a solution . The responsibility for developing and testing the engine and drive train softwares live within the engine drive Train Division in germany for the two cylinder and four cylinder engines. Will this require a Software Patch or changes to the vehicles architecture and hardware. Yes, thank you for this question. I think we have to differentiate now into three groups of cars. You have mentioned that roughly 500,000 cars are affected. Out of those, about 430,000 cars are the gen1 vehicles, started here in 2009. For those cars we believe a software only solution will not be possible because also to be quite frank and logic, if it would have been possible they would have done in the the first place. So for those cars we are working on both software and Hardware Solutions and there are different strategies about an additional catalytic converter as well as an scr rear tank. But this is something which is hardware edge mering which is complex and takes time to develop and test this. The generation two vehicles, which is just passat model, there are 90,000 cars here in the u. S. This will be probably most probably a software solution. This is tested now and could involve one or the other lets say sensor but whatever i explain to you now anyway is being discussed in a timely manner now in the next couple of weeks with the California AirResources Board and the carb. For the generation three vehicles, so the actual ive gone way over time. Im sure other colleagues will be asking more detailed questions and well get to that. I now need to yield five minutes. Thank you, mr. Chairman. Your company acknowledged it installed these defeat devices on a number of models dating back to 2009, correct . Sorry, i have a problem oncing with all this noise down here. Mr. Chairman, can you please have the quiet in the room so mr. Horn can understand me . Yes, thank you. The room will be quiet, especially up front so youre not distracting. Thank you. Ill ask that again and if i can have the clock reset to five minutes. Mr. Horn, your company has acknowledged that it installed these defeat devices on a number of models back to 2009, yes or no. Yes. And do you know how the various defeat Devices Installed in the cars actually work at this point . Personally no. Im not an engineer. Does someone at vw know how these defeat devices work . I believe this is also within the investigations and i believe can you please give us the information when you find out . We will. Thank you very much. You mentioned this West VirginiaUniversity Study conducted in may of 2014 which found that the real world knox emissions exceeded epa standards by as much as 35 times. Following publication of that study wv represented to the California AirResources Board, or carb, to the epa that the increased emissions were due to technical issues and unexpected inuse conditions, correct . Im sorry. You guys cough here all the time and i have trouble all right, ill ask the question again. Thank you. After that stud baby West Virginia university, isnt it true that v told the epa and the california board that the increased emissions were due to technical issues and unexpected inuse conditions. Yes, true. And those representations at that time were in fact incorrect and false, werent they, sir . Yes. Yes, they were. Now turj did anybody at the Volkswagen Group of emergency kn of america know that these discrepancies were due to the defeat devices when they made the representations to the regulators . To my knowledge at this point of time no. No one in the u. S. Did . No. Okay. Now in december 2014 vw proposed a recall of 500,000 vehicles to resolve the technical issues. Is that correct . Uhhuh. And, in fact, a number of those vehicles were recalled, is that correct . Yes, most of them. But after they were recalled the california regulators still said that that fix did not work, isnt that correct . That is correct. Now, to your knowledge, did anyone know about these defeat devices when the Company Announced the recall in december of 2014. To my best knowledge today no. Mr. Horn, when did you personally learn of the defeat device and under what circumstances . Around the meeting on september 3 with carb and the epa. Okay. Now you talked when the chairman asked you about these cars, im concerned about what were going to do about the 500,000 cars we have on the road in the u. S. And the first thing is, as you just testified, about 430,000 of those cars cannot be fixed by a software only solution. Is that correct . Yes. And thats because of the way that the engine is designed in these vehicles, correct . I would say not the engine is designed but the after treatment systems. Right. And ive got to say, ive got to acknowledge my wonderful dealer fred emmik whos here today and he let me talk to his wonderful mechanics. They gave me this chart right here. I tried to take the part itself but it was too heavy and they told me id probably have to pay them 2,000 if i lost it so i decided to take the chart instead. This is the chart of the exhaust system on these 430,000 cars and as i can clearly see, you cant do a minor little fix to fix this problem so what is vw going to do for these 430,000 cars so the users can use them and so they can pass the emissions test . So from this distance i cant see the chart but i believe its maybe something out of our service literature, our customer literature. Its the exhaust system for these cars. What can be done to fix that . Theres two scenarios next to the software adjustment. These are for the cars that the software adjustments will not work. Were talking now about generation one cars, the 430000 cars . Thats right. The picture you have shown and the treatment software alone doesnt work because otherwise they would have done it right. Right, so what are you going to do for those cars . Two technical scenarios, either an scr tank or specific catalyzer. Two technical scenarios. But those cars dont the urea tank right now . No. So this would be a major fix, correct . Yes, maam. Now what is the time frame vw has set far fix . We are still working on the time frame and its too early to say when this fix exactly is going to take place. When are these dealers going to be allowed to sell these cars . The issue with the dealers, as fred emmik told you, is that we have not the model year 16 certified and we have stop sales on our own. Right. When is that going to be fixed . Theres two scenarios. A scenario we are trying to get a conditional approval with the epa until we have the final software fix beginning of next year. Beginning of next year. But theres a and in the meantime what are the dealers and customers supposed to do . The ones who have these cars . In the meantime, no customer can buy a car because its not available for them and with the dealers weve very early started a program to work with them to also help them financially and to communicate with them okay, but the 430,000 cars that are already on the road. What are those customers supposed to do . Their cars can not pass the emissions test. Epa has said and theyve repeated this also in their statement that these cars are legal and safe to drive and to now theres no indication that they didnt pass any emissions change. The time has expired. We need to recognize the chairman of the full committee mr. Upton for five minutes. Thank you, mr. Chairman, i want to go back to the specifics of the defeat device. I live in michigan. Where i live we dont need to test our cars for emissions on an annual basis as many states require. Certainly in this region here in d. C. I know they do so how is this defeat device actually set up . So that it was different on an individual when an drif drove it down the road versus taking it to a service station and getting the emissions sticker that is often required in the states that require such. Ive been told a couple things but i want to know if you can walk me through how that could change the emissions system. What happened . I can share my best knowledge but im not an engineer, Neither Software engineer. But let me try to explain. Let me try to explain. My understanding at this point of time is that the software we designed, that the vehicle or the software could detect whether it was on a Testing Laboratory environment or whether it was on the street and one example of this, as experts have explained to me, is that the software could detect whether the Steering Wheel made an angle. So there might have been and there will be other parameters like maybe speed and change of speed and those things. Maybe the weight of the driver in the drivers seat . I dont think so. But maybe. I dont know. So wouldnt it be easier to develop the software that would just remove that . Yes, this software will be ready but of course when that happens the car wont meet the emissions test . Regarding the model years 16 and 15 which are the generation three car which is we are discussing right now with the agencies the defeat device will be either switched off and from january onwards will be completely taken out of the car and those cars will pass the emissions test. So how many vehicles will not pass the emissions test . Of the ones that youve identified . I mean, now, my question so youll be able to do with that with the later versions, right . But not the earlier version of the vehicle . They wont be able to pass by turning off the device the defeat device there will be a number of cars that, in fact, will not meet the current standards. The current standards, yes, youre right. And how many of those vehicles are there on the road . Well, we have a total of 500,000, 430,000 generation one vehicles, 95,000 generation two vehicles and then around 70,000 generation one vehicles and so now all of these cars are out of the Legal Compliance, here thatly, but as epa said, all these cars are legal to safe and drive for the owners. So were not selling the cars but the owners can legally and safely drive their cars. So your dealers across the country. They have their finance plans where they have they have quite an inventory of cars theyre now unable to sell. Theyve paid in advance for those under the financing plan the dealers have and they are not going to be able to sell them for a number of months, perhaps even as long as six months at a minimum until the fixes can be done. What type of remedies are you offering the dealers in terms of financial incentives knowing theyve paid for these cars and, frankly, lost a boat load, i would imagine. Yes. And this is that inventory has got to be a pretty big loss. This is also one of the things which troubles me personally very much because weve worked very hard and brought profitability up and all of those things but ill tell you exactly. On friday the 18th, the notice of violation was communicated. We had a call with a National Dealer council with some of the folks sitting behind me. On monday we issued our First Financial relief aid so weve put all the tdis, used cars, cpo cars on free flooring. We took the bonus thresholds out for car sales so we paid maximum bone bonus for each car sold and we took also out the Customer Satisfaction targets objectives and paid maximum Customer Satisfaction bonus on those cars. This is more than 1,000, 1,500 per car. Coming towards october now, we provided by every dealer around the u. S. With a discretion their fund, with a discretion their fund which was explained to them through the district managers, Sales Operations managers and was wired to the dealers on october 1. I dont want to call out the number but its a significant amount of money in order for them to have flexibility. So accountability, flexibility to solve the most urgent customer cases or the invest or the put the money where they think it would be fit. Now when i come out of this congressional hearing on friday we look at the next programs in order how can we help the dealers with the cash flow of their cars and the cash position because one thing is very, very clear and im damn sincere about this, the dealer profitability in this country is my first objective. I said this january 1 and i continue to say this. Also on friday we look very intensively into customer remedies and what we feed to do with customers and they will be the first scenarios on the table. I now recognize the Ranking Member of the full committee mr. Palone for five minutes. Thank you, mr. Chairman. Mr. Horn, your statements so far dont give me much confidence that were ever going to see a fix for these vehicles that are impacted. You say that it cant be fixed by software only solution, you dont have the necessary timetable as to when the fix begins. Have you been given enough information about how the defeat device affects the engine to actually make informed judgments on whether the fix will actually work . How do we know that what youre proposing to do is actually going to work . Whatever i tell you here today. Agreed and is coming from the Technical Engineering Department and alongside our actions in europe we have to have our actions in the u. S. And the technical i understand but i mean is it fair to say that you really dont know whether you can fix these vehicles to achieve the emissions standards . We know that we can fix these vehicles to achieve emissions standards. But then what happens what happens with regard to other things like fuel economy, Engine Performance . People bought these vehicles thinking that they were going to meet the emissions standards, they were going to have good fuel economy, they were going to have good Engine Performance. Can you guarantee any fix you make to the vehicles doesnt affect fuel economy or Engine Performance or both . At this point of time my understanding is if we correct the nitrogen oxide emissions to emissions standards the customer will get the mpg. Thats my current understanding. Whether the full performance of the car and this is something that mueller said in germany maybe on top speed they one or two Miles Per Hour might be missing but this is of course something which we will share with the agencies but current understanding is that the customer keeps the miles per gallon. The concern siff when you buy one of these cars youre relying on not only the emission standards but the fuel economy is good and you get to the issues of damages here. In other words, if im an owner and i dont and the fix doesnt achieve good performance, good fuel mileage, ill expect to be compensated in some way if thats not the case. I remain concerned that any fix will substantially change the cars and that its unfair to the consumers who bought the cars and relies on them because they expected them to perform a certain way. But youre telling me the fix will guarantee good performance land guarantee good fuel economy . I said to my current understanding in achieving the emissions standards the miles per gallon will be achieved. There might be a slight impact on the performance and this is naturally is not only the discussions with the agencies but of course we will look into compensating our customers and of course if there would be significant differences this would be part of the discussion. Well, let me get to another issue. What about the impact on clean air . We know theres all kinds of health impacts, asthma, other respiratory illnesses that can seriously affect people, send them the hospital or get sick because ioiof nox and other problems. Every also read the epa statement that in general and not specifically to volkswagen they have indicated there might be a respiratory problem which could also lead im quoting yesterday, basically, to hospital visits. Well, what are you going to do to rectify that . How do you plan to mitigate the harm caused by the excess pollution emitted into the air the last seven years. My understanding is that the nox emissions are up to 40 times the allowable limit. What are you going to do with regard to this excess pollution in the impact it may have had . I think theres first of all many different studies so i would like to go back to the epa yesterday and what they said. I think it will be part of the discussion but i would like to point out the that if you look at 100 of nitrogen oxide emissions in the u. S. , the car and truck industry is 5 . Our group here in the u. S. Has 4 of the 5 , which is. 2 and out of this 20 is tdi. So now we can multiply this, which is not belittling this and its unacceptable but clearly the discussion will come up and needs to be addressed. Thank you, thank you, mr. Chairman. I n thank you, mr. Chairma. Mr. Horn you said profit isnt your top priority when you were speaking for the dealers, yes. I would hope that safety, quality, integrity are to Top Priorities and profitability comes along there as a part of that picture let me ask you about this. Are you going to buy back the inventory that the dealers have . No. Our plan is not to buy back the inventory. Its to fix the cars. Okay, let me move on with you. Have you identified the individual or group of individuals that are responsible for the defeat device . These investigations are ongoing. Youve known about this since the spring of 2014, year and a half. We know about this since september 3 that the violation is there and since this time the and since the september 18 notice of violation the board has asked and but you have known there was activity around this defeat device since the spring of 2014, correct . No, i do not know as ive said. So you did not know in the the spring of 2014. No. No. So you just learned about it september 3 around the september 3 events, yes, maam. All righty. Lets go to your sixpoint remedy plan. Youve talked some about point three, which is developing remedies is and i would assume if this landed on your plate september 3 that you all have put all efforts and energy into this plan . Correct . Into the remedies . Yes, correct. Very good. Then lets go to point number one. You state that volkswagen will examine its compliance processes and standards and adopt measures to make certain that the Something Like this cannot happen again. So why dont you give us a little bit of specificity on that. And why what, if any, steps are currently under way to handle these compliance issues. What did you start as of september 3, 2015, and what is your timeline . How long is it going to take you to bring this into compliance . As im the ceo of Volkswagen Group of america i can only report to you on what is managed by volkswagen headquarters worldwide at this point of time and as ive said, jones day manages all the investigations on who did what, when, how and why and we we need to do to rectify this in the future for process adjustments and compliance adjustments. So youre saying as of now you dont have a plan. As of now we are still in investigations, yes. When with k we expect you to have a plan to handle compliance, to make the owners of your vehicles whole, if you will, to make the dealers that have trusted in you to make them hole. Also the individuals that are employed by your facilities. When are they going to have certainty as it relates to the job . So you all say youre still investigating so on your timeline is when do you expect youre going to be able to say this is the way forward . You mentioned six points and we started with the first point, compliance. I dont have a timeline for this yet. Were working instan stain lousily with the dealers and developing plans by the week as we go. You can ask those folks on whether this works or not. For the customer it depends on the technical remedies. Again this is generation three january of this year, january of next year, sorry, we will start to give software to the agencies. Generation two middle of the year, most probably generation three due to the technical complexity will be a little bit later so theres different timings and i apologize not for having fullfledged plan of the worldwide Volkswagen Company in my pocket right now. So you are certain its going to be a multiyear plan . Excuse me . You are certain the remedy will end up being a multiyear approach . Yes. If you look alone at 430,000 cars. The repairs might take five to ten hours in order to fix this. Technical fixes, if you look at your recall history in this market, also with nhtsa then these actions take one, two years minimum, minimum. When the fix is available for everybody, including parts and discussed with the agencies and agreed to. Okay. My time has expired. I do have one other question about point two in your remedy plan. Mr. Chairman, i will submit that and yield back the time. Thank you very much. Now i recognize ms. Caster for five minutes. Well, thank you, mr. Chairman, for calling the hearing. Mr. Horn, according to reports, wws defeat device is found in nearly 500,000 vehicles. Are you confident in that number . Could bit . Could bit less . We are very confident in this number . Pardon me . We are very confident in this number. Okay. Have you calculated the loss in value to customers, car owners . Not yet. Thats the matter of the not only investigations but calculations are ongoing and on friday we will look at the first scenarios. Youve called your investigation preliminary but youve known about this for a year and a half, the problems first came to light in may, 2014, is that correct . No, this is not correct. As i explained, the study was published and i had no reason to believe that there was a defeat device in those cars. Well, you found out, according to reports, in 2014 that there was an issue, isnt that correct . An emissions issue, yes, thats correct. So what did you do at that point in time . At that point of time a plan was asked for from the engineers and in july, 2014, midle of the year, presented a plan to me it was and this is very important also which was agreed with the Product Safety Committee worldwide and these are those guys who manage all the recall, all the Service Action worldwide, including technical procurement, Legal Service and those things. They came back with a plan first of all acknowledging those results were correct and secondly with a clear timing on when the cars would get a software fix which was mentioned in one of the Opening Statements as of last end of last year. Do you feel like youve been personally deceived now . A you found out subsequently that the defeat devices yes. Yes. Explain that. Look, i worked 25 years for this company and beyond my personal objective of dealer profitability, integrity, quality and not cheating was always for me given for company. And when i learned this im as touched and moved as my employees and another Group Feeling the effects of the v defeat device defrauding are the vw dealers and their hardworking employees across this country. In addition to consumers. A recent Associated Press article noted dealers are facing a flood of angry call, emails, et cetera, from volkswagen owners who feel betrayed because they believed they bought a car that polluted less without sacrificing the good gas mileage. And the performance that comes with a diesel engine. How many v dealerships are there in the u. S. . We have about 650 vw dealers 3507 350 audi dealers. And how many diesel models . 25 . And these are the front line for unhappy customers who feel betrayed by the volkswagen brand. A media account yesterday quoted one dealer as saying this is the biggest fraud ive ever seen. What do you tell these Business Owners and their employees whose livelihoods depend. I went immediately out, i made a dealer video sent out and the dealers showed it to their children because in their families and their employees because they said thats the right thing on the way we are approaching this. Detail for us how vw is informing dealers about the defeat devices and the solutions to fix cars that feature these defeat devices. As soon as we have the information necessary or ready and have discussed this with epa and carb about the timing or alongside the dealers they will be informed . Theyre not getting any information right now . Of course theyre getting information. Detail that for us. They get the information that we financially help them through this crisis. Secondly the thing thing is we took bonus thresholds out, they ever free flooring, we got the discretionary fund, we increased incentives for 2,000 for loyal customers. What does that mean . That means we get them started and dont let them dry out in the field. Is that a direct payment to customers or dealers . The first two pouns, the bonus payments and floor plan is directly to the dealers. The discretionary funds is directly to the dealers and the incentives are for them this is the certain Cash Incentives that they can manage to bring loyal customers in. Whether its thedi customer or gas customer. So is the intention for the dealers to contact customers who have purchased cars since model year 2009 . Yes, as one of the possibilities, sure, yes. Well, vw isnt giving direction to dealers on contacting their customers at this point in time . No, of course. We have set up in the frequently asked questions, we are guiding dealers with realtime the same information we have which goes to our call centers as well. I visited the call center in auburn hills, those people are also front line. They need the same information and as soon as we have it other people get it as well. What has vw told dealers about cars that dealers have sold and cars that are now sitting on the lot . We have informed the dealers directly on september 18. We followed up with letters and videos to do this. I now recognize mr. Barton for five minutes. Thank you, mr. Chairman. Thank you and miss degette for organizing this hearing. Im not a registered professional engineer anymore but at one time i was. I still am an engineer by training. My daughter drives a volkswagen beatle. My former stepdaughter drives a jetta, i dont think theyre diesel, they think theyre gasoline power bud theyre both volkswagens. Ive always had the highest respect for volkswagen. I think its a fine Company Engineering wise and product wise but i must tell you, sir, its extremely disappointing to look at the i dont know, the right word to use the immorality of the corporate decision to knowingly and willfully cheat on u. S. Emissions standards. I mean, volkswagen is one of the premier name brands of auto manufacturing in the world and its a reputation thats been gain gained over the last 50 or 60 years and to have a company of your stature knowingly and willfully make a decision at the highest levels of the company to put a Software Program in your products that are meant intentionally to deceive or cheat on u. S. Emissions standards to me is i would havent believed it if it wasnt factually proven. So my first question to you is im hold that this was a decision made in germany at the corporate level, is that correct . Two answers to this. First of all the investigations are ongoing but this was not a corporate decision from my point of view and to my best knowledge today the corporation in no Board Meeting or supervisory Board Meeting authorized this but this was a couple of Software Engineers who put this in for whatever reasons and i would also like to find out. And this is an oversight hearing so i assume youre testifying under oath. Im under oath. I understand this, sir. Okay, so what youre saying is that the senior the president of Volkswagen International did not know about this when it happened . What i said was to my understanding this was not a corporate decision. This was something individuals did. Now, thats not what i was led to believe but i take you at your word so ill ask the second question. When did senior management, i. E. , the president of Volkswagen International, the executive Vice President , whoever your senior day to day Corporate Officers are, when did they learn of this action . To my understanding also around the september 3 notification of the agencies. But it occurred years ago. Yes, sir. Do you really believe as good, as well run as volkswagen has always been reputed to be that seniorlevel corporate managers, administrators, had no knowledge for years and years . I agree its very hard to believe and personally i struggle as well, yes. Thats an honest answer, i appreciate that well, i dont know what to do but i do know that you can have an honorable disagreement about emissions standards and weved that on this committee but as somebody who voted for the Clean Air Act amendments and as a conservative who believes that if its the law it should be implemented and corporate especially International Corporations should honor those laws, your company has not, i dont know what the penalty should be but it should be more than just a slap on the wrist. I mean, this im going to listen to the rest of the testimony and the questions and the staff recommendation bus in every other case since ive been a congressman when weve had problems with manufacturers, automobile manufacturers, in every case its been something happened that was really a mistake, an accident that they just didnt foresee it. Thats not the case here. Yes. There was a knowingly and willful decision to deceive in up with of the most important markets in the world and that, sir, is just i dont think. I fully agree. Thank you, sir. I now recognize mr. Kennedy for five minutes. Thank you, mr. Chairman. Mr. Horn, thank you for being here today. I understand youve said several times your testimony is preliminary and theres investigations ongoing so i appreciate that and i recognize that. I do want to go back to what a number of my colleagues have gone to with regards to the timeline here. My understanding and from your testimony was that in the spring i think specifically may of 2014, was when volkswagen became aware that there was something issue with regards to emissions, is that right . Yes. And it was from may to december that carb and epa launched investigations into those the emissions in the company itself, vw, started the information as to what led to the oddities, if you will, with regards to the emissions test, right . I cant answer this, really, i know that the actions to remedy these findings were discussed with carb and epa. Whether they have undergone own investigations between may 2014 and december 2014 i dont know i know they did this afterwards when we started to flesh the cars with the new software. So if i tell you epa and carb continued an investigation after that preliminary report from may, then december 2, 2014, vw shared test results with epa and carb and proposed a recalibration ticks, is that accurate . Yes. And vw initiated a voluntary recall of 500,000 vehicles to deal with the recalibration issue. In may carb commenced testing, may 6, i believe, 2015, carb commenced testing to discern whether the fix that vw proposed adequately and accurately fixed the underlying issue. May 6 to july, 2015, carb conducted laboratory and onroad testing to confirm the efficacy of the recall. What im getting at here, sir, is july 8 carb shared test results with vw and the epa prompting a series of technical meetings from my understanding and according to carb in the course of those meetings vw disclosed that there were several issues that gen 1, gen 2 and the 2015 model of the again 3 had a second calibration intended to run only during confirmatory testing. So there were some knowledge at least in july of this year that there was some manipulation of Software Code with regards to the testing, was there not . This meeting you are referring to i dont know. I can tell you that the first issue i got back to and my attention was on the 20th of july when my people of Product Marketing came to me and said we dont get the model year 16 diesel certified and i wrote an email to the evp for research and engineering and i escalated this and he said and the explanation was twofold, a, there was no systems, and i dont know whether this is right and, b, theres still information missing. Do my teams in herndon with the National Science company did not have this information. And then only in the weeks afterwards it started to unfold. So, sir, if i am understanding the broad aspects of your testimony correctly. As you said a number of times, this was not a company decision, this was a decision made by youve been watching a reair of this mornings house hearing on volkswagen before it went into recess for the republican conference meeting. That meeting has ended after Majority Leader Kevin Mccarthy of california announced he was dropping out of the race for House Speaker and outgoing House Speaker john boehner said he would postpone the gop conference elections. So were back here in the hearing room. It should reconvene in a few moments. The chair and Ranking Member are in the room. We expect to hear from epa officials after hearing earlier today from the chairman of volkswagen america the head of american operations testifying about the car companys admission to installing Software Designed to cheat emission tests in about 11 million diesel cars worldwide. The cars passed the test but they were releasing nitrogen oxide up to 40 times the level allowed by federal law. The chairman of volkswagen has resigned and the company has plans to spend about 7. 3 billion to fix the vehicles, including about 500,000 here in the u. S. Again, epa officials are expected to appear this afternoon before this house energy and commerce subcommittee. Live coverage on cspan 3. Mr. Chairman, ive just got to say, i think our witnesses are probably really happy theyre on the second panel. [ laughter ] we reconvene this subcommittee of oversight investigation hearing on volkswagen emissions cheating allegations and initial questions. We have grundler and mr. Brooks. You are aware the committee is holding an investigative hearing and when doing so has the practice of taking testimony under oath. Do you have any objections to testifying under oath . Both witnesses say no. The chair then advises you that under the rules of the house and committee you are entitled to be advise bid counsel. Do either of you desire to be advised by counsel during your testimony today . Both witnesses indicate no. In that case would you please rise, raise your right hand and ill swear you in . Do you swear the testimony youre about to give is the truth, the whole truth and nothing but the truth. Thank you. For the record, both witnesses have indicated yes, you are now under oath and subject to the penalties set forth in title 18, section 1001 of the United States code. Well now allow you each to give a five minute summary of your opening statement, mr. Grun dle you may begin. We appreciate the opportunity to testify on the matter of the Environmental Protection agencies. Notice the violation issues to volkswagen. Im chris grounder will and i direct the epas office of transportation and air quality which is responsible for epas air pollution Compliance Program for all mobile sources, vehicles, engines and equipment including cars, trucks and fuels. Im joined by my colleague phil brooks, director of the office of Civil Enforcements air enforcement division, epas Civil Enforcement program develops and prosecutes civil administrative cases. Epa sent a notice of violation, inov of the Clean Air Act ot volkswagen including volkswagen a. G. , audi a. G. And Volkswagen Group of america alleging four cylinder and audi diesel cars sold there the u. S. From model years 2009 to 2015 include software that circumvents epas emission standards. Volkswagen manufactured and installed software in the electronic control module of these vehicles that sense when the vehicle is being tested for compliance with epa emissions standards. Put simply, these cars contain software that turns off or reduces the effectiveness of emission controls when driving normally and turns them on when the car is undergoing an official emissions test. This is known as a defeat device. This design feature results in the cars mitts up to 40 times the emissions that are allowed to ensure Public Health is protected. These devices contain essentially a switch that senses whether the vehicle is being tested or not based on various inputs, including the position of the Steering Wheel, vehicle speed, the duration of the engines operation and barometric pressure. The nov epa sent covers roughly 482,000 diesel cars. All new cars sold in the United States must have epa issued certificate of conformity demonstrating the car meeting a applicable federal emissions standards to control air pollution. By making and selling vehicles with defeat devices that allowed for higher levels of emissions certified to epa, vw violated multiple important Clean Air Act provisions. These violations are very serious. Not only because the illegal defeat device results in excess emissions many times the allowable standard but because after that vw con vealed the facts from epa, california and consumers. These vehicles are emitted more nitrogen oxides, or nox are allowed. We know exposure has been linked with a range of serious effect effects including asthma attacks and other respiratory illnesses that can be serious enough to send people to the hospital. We are in the midst of an Ongoing Investigation into vws actions. We will work closely with the department of justice throughout this investigation and determinations regarding potential penalties will be assessed as part of the investigation. Were unable to provide further details because the release of such information could jeopardize this ongoing enforcement investigation. Epa will continue to work closely with the California AirResources Board during the investigation. Carb led and contributed much of the effort to get us to this point. Our agencies work very closely together on the implementation and oversight of the vehicle emissions program. As part of the investigation we intend to assess the scope of vws liability under the Clean Air Act and whether there are additional vehicles with defeat devices. We also intend to assess the economic benefit of vw to noncompliancened pursue appropriate penalties as well as the excess pollution from vws violations and the appropriate ways to mitigate them. While our enforcement is aware of the violations, we have asked for questions and answers from consumers on our web site such wlaz epa is recalling vehicles. On september 25, my office sent a letter to all manufacturers notifying them we are stepping up testing activities in response to these alleged violations. Over the 40 plus year history of our program we have continuously updated and adapted our approaches to compliance oversight as technologies and situations have changed. We take very seriously our responsibility to oversee the implementation of our regulations. It is this oversight that ensures the benefits of clean air emissions are realized. The consumers are getting what they pay for. Again, thank you for the opportunity to appear as witnesses this morning. We welcome your questions. Mr. Brooks, you dont a statement, you issued a joint statement, correct . Thank you. Ill recognize myself for five minutes. When you speak turn the mic on and bring it as close to your mouth as possible. Mr. Grundler, in december of 2014 vw conducted a voluntary recall to address the on road emissions as you know. What what did vw convey to you about the cause and solution for the higher emissions in advance of that recall . Thank you, mr. Chairman. Throughout the 2014 once california and epa learned of these excess emissions there were numerous technical conversations between the California AirResources Board and volkswagen. California took the lead on exploring what the problem was with these vehicles and my understanding is that they received multiple different stories, plausible reasons why these vehicles may not be performing as theyre supposed to. Chemical based reasons, physical based reasons at the end with the remedy that was proposed was described to fix a problem with the vehicle concerning how its operated under different temperatures, what kind of dosing sensors were used to make the emission control system work properly and that they were confident in a fix. At the time they were told by the state of california to proceed but that california was going to test these vehicles to make sure that the fix was effective and it was not effective based on the subsequent testing by California AirResources Board. Did you conduct any further evaluation of their conclusions and proposed solutions to advance the recall . What was the operational process you had in interacting with them . Discussi discussions, conversations . How did that go back and forth . Epa and california have a Strong Partnership when it comes to oversight and compliance. Sometimes california takes the lead on these matters, sometimes epa takes the lead. For example, last year we had the lead with respect to the hyundai kia investigation and subsequent action, california volunteered to take the lead on this matter. And what happens during 2014 is what is happening right now as we speak. Which is trying to determine what is the right recall solution to address these excess emissions. It was vws to propose a fix, they did so and those fixes did not work. So my team participated in some of these. We became much more actively involved in 2015 when california produced their test results on the supposed fix of these vehicles and that data showed there still remained high and unexplained excess emissions. Who did you have these conversations with with vw going back and forth communicating while they are talking to you about these results. Do you recall . I was not part of those conversations. It was my team and the california counterparts. My understanding is those conversations included both officials from vw of america as well as officials from germany. Do you know their names for the record . I do not. Are those things you could get for us . Yes. Would you please do so . That would be important. Now a technical question, im not sure if you can answer this. Here is the switch that when its in one position for an emissions test it made a change in how this was operational so the emissions would be lower. In the other position the emissions were quite high. Is it possible to just keep that switch in position of loe missions and they could be in compliance or does that damage the engine or reduce power significantly . Do you have any idea. Those are the same questions we are asking volkswagen right now. Its not actually a when the vehicle senses when its on a test, it very quickly goes into clean mode and when it does not sense the very specific parameters that are specified will in our federal test procedures, it goes into a high pollution mode. I think what youre asking, if you just take the software off and will the vehicle operate normally. And we dont know yet. Were asking those questions. And the answers will depend as you heard this morning on which generation of diesel engines were talking about. We believe that the newer generation, the socalled generation three engines, will be much easier to fix than the older versions. Thank you. Im out of time now. Just to continue along the newer versions, they have these urea tanks. So its a system that you can both adjust the knox filters and urea tanks. And in fact the vw dealer then the dealer in denver and also their mechanics told me they feel like it would be a pretty easy adjustment even in the codes to fix it in the 2015 and 16 models. Is that your understanding . I dont want to speculate that. That seems logical to us. We want to see the software, we want to test the vehicle before any further action is taken. Obviously. But its the agencys position that the vehicles do need to be fixed, right . Absolutely. I mean theyre noncompliant under both federal law and california state law. Thats correct. And i think some of the impressions given by volkswagen is theyre safe to drive. They might be safe to drive, but they dont comply with the emissions standards, right . Thats right. So for the cars between 2009 and 2014, the fix is a bigger problem because they dont have the urea containers. So its harder to see without major structural changes to these cars how they could be brought into compliance. Is that your understanding . Thats correct. They will require a more substantial engineering solution. Theyre either going to require installation of a urea system or different knox filters or both. So that will be quite elaborate. Im not a mechanic and i dont pretend to be one, but i went over and looked at this, and it looked like a very naughty problem to me. What california and e abopa directed volkswagen to do is to present more than one option on how to address these excess emissions. And we want to look at it carefully particularly with what impacts they will have on the owners. And have you given vw any kind of a deadline for coming up with that fix or have they indicated to you when they might be able to come up with this . This is something that really concerned the panel in the earlier conversations today. I can assure you we are pressing volkswagen for that plan and for those solutions. Were meeting with them on practically a daily basis. We hope to get a proposal very, very soon. But we want to make sure that its effective. So there is some risk in rushing. But we expect to see something as early as next week with respect to generation and has the company told you that they believe they can fix the affected vehicles without affecting fuel economy, Engine Performance or both . They have not said so yet. So i just want to say one last thing, which is oftentimes we have the epa in here and sometimes its not the most pleasurable experience testifying. But in this case, the director of the International Council on clean transportation, which was the organization that commissioned the West Virginia study said, quote, this a powerful affirmation of u. S. , federal and california vehicle Emissions Regulations and of the agencys. Clear protocols, end use requirements for the useful life of vehicle, clear enforcement follow through, the authority to find and enforce recalls, these are the best practices that regulation worl wide should incorporate and todays announcement shows why. End quote. So thank you and your agency for your efforts here. In light of vws deception, are you adjusting testing Going Forward . Yes. And we already have. And what have you done . Well, weve learned from this episode for sure. We wish we had found it sooner. As soon as we learned of this data, carb and so how are you adjusting the test being Going Forward . Pot line is we are going to be unpredictable. What is required to a Robust Program is testing of new vehicles in the lab, testing what have we call end use vehicles in the lab as well as on road measurements. Thanks. I dont have much time. Mr. Brooke, are you adjusting enforcement efforts Going Forward and if so how . Thank you for the question. The answer is yesse, are you ad enforcement efforts Going Forward and if so how . Thank you for the question. The answer is yes, are you adju enforcement efforts Going Forward and if so how . Thank you for the question. The answer is yes although i think the prosecution, the investigation of this matter will proceed along our normal path. I think what we will see, we will be getting a lot more phone calls from people. And so in that way it will change. Well have more to respond to. Thank you very much, mr. Chairman. Mr. Griffith, youre next for five minutes. Thank you very much. Appreciate you all being here and appreciate the questions that have already been asked. And obviously there are a number of us if you were listening to the previous testimony, i am one of the people who owns one of the diesel volkswagens and so i have some questions in that regard. I think its important that you change your testing methods and first question ill ask you, do you think it might be helpful in doing your job if we pass some legislation that would allow a portion of the fine money in a fraud case like this to go to the university that discovered it . Wvu discovered the problem, you all didnt. Believe it or not, i dont think the epa can and should do everything. And that this might be of some assistance in just like we do with certain pbad actors in othr criminal typesettings who are committing fraud on consumers or selling drugs, we take some of their ill gained goods, we take it away from them and the government gives it back to some of the folks who helped discover it. Do you think that might be a helpful piece of legislation for us to take a look at . Either one of you. Both. Well, i dont think i can comment on what legislative changes might be menecessary. I do understand that in the criminal context those kinds of remedies have been imposed before. So if you had that power now, please tell us can you speak close to the mike . Youll have to sit forward. If you currently have that pow power, let me know. But water you cor whatever you p with a fine that is appropriate for volkswagen, it would seem to me to give wvu that uncovered this problem part of the fine to help them continue their research. I mean thats what we do with prosecutor, Law Enforcement agencies who uncover crime. We do that in securities cases. There are different way thats done. Do you think that would be an authority that would be helpful to the people of the United States of america . Well, i can take that back and we can respond in writing. Sounds like a good idea to me, ill just tell you. It is interesting that wvu found it and that you all did not. But i understand you cant do everything and youve answered some questions about how youll go forward. Lets go to the other side of this. Whatever you all come up with and whatever volkswagen comes up with, ill get my car fixed or if they do a buy back practice, ill have to debate whether its better to fix it or sell it back to the company. Ctice, ill have to debate whether its better to fix it or sell it back to the company. But im curious, at some point am i going to be subject or other consumers in my shoes, are they going to be subject to penalties from the epa for driving a vehicle that doesnt meet the standards that were supposed to be in place when they bought the vehicle . That question depends on where the particular owner of one of these vehicles lives. If you live in an area that does regular emissions tests that the state conducts these emissions inspections, some states require that in order to reregister the vehicle, if its subject to a recall to show that the fix has been made. Other states do not have that requirement. So it exceit g depends on where living. If someone isnt paying attention and arent following the new, and there are a whole bunch of those folks out there, they could end up with some kind of a penalty from their state but currently there is nothing nationally . Thats right. Would you anticipate that the epa would go in the direction of some kind of