Could members of the media please move out of our way so we can begin the hearing . Mr. Horn, you can sit in that chair. Thank you. 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. It was a 76 beetle. I learned a lot about cars. I could take that thing apart continued to work. I did all the maintenance myself because volkswagen had a legacy as the peoples car to be people friendly. 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. I trusted volkswagen would continue to build a reliable car. That word trust alone as you know is the key factor in Building Customer loyalty. That trust is what helped build volkswagen because we believed its company looked out for customers first. Then three weeks ago car owners around the world were shocked to learn that volkswagen admitted it installed software for a number of years in millions of its diesel models that effectively defeated emission controls during routine driving. This followed the Environmental Protection agencys announcement on september 18th that it had evidence to support allegations that vw was cheating on its emissions tests. As epa reported at the time, when the cars were subject to emission testing, the diesel vehicle switched into a mode designed to pass the test. Then switched back to a different mode during normal driving, that it emitt eted nitrogen oxide 40 times the limit. The software was used in an estimated 11 million vehicles involving several vw lines. In the wake of this apparently massive deception, the energy and Commerce Committee opened an investigation to get answers for the American Public. 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 we will receive testimony from mr. Michael horn and from epa officials tasked with ensuring the ables on american roads meet federal environmental standards. In addition to subcommittee that tends to pursue the 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 say that i expect 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 been discussed publically in connection with volkswagens various board meetings in germany. As i said before, there are core questions we will pursue today both for volkswagen and the epa. Most critically, what happened, who was involved, why were these actions taken . We have a number of questions concerning the impact of these decisions on customers, familyowned dealershiped and the American Public. I hope mr. Horn can provide context to for us and expand his testimony. We look to understand the understanding of vw executives about what was done to the engines. And was it done to deliberately deefsh government regulations . And regulators. What is vw doing to fix the problem and make whole those who have been affected by the action snz at some point, prior to 2009, vw made a choice to move forward with engines that evidence suggest were not compliant with u. S. Emission standards. The software was initially deployed in a first generation of the diesel engines which account for approximately 340,000 of the affected vehicles. However, despite apparent advancement in the emission control systems in two future generations of the engines, the software remained in place. If the technology was improving, why did the company what did the company understand about the software cheat . What does this mean for fixing these vehicles . Will some be easier than others . Of course, for epa we have questions about its recall programs. I hope we can get clear answers today from the agency. Why did epas audits fail to detect problems, especially in the Older Technology . What is epa doing to ensure any fix it requires of the automaker does not negatively affect vehicle performance . There is some need for a sense and proportion regarding this matter. The 480,000 or so wv vehicles implicated in the scandal represent only 0. 2 of the cars and trucks in the 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. Epas testing will address this question. We hope our witnesses can understand why our confidence has been shaken. At root, the behavior to which vw admitted represents a violation of public test. The reverberations of this violation can be seen across the United States and across the world as people grapple with the implicatio implications. We need to understand the facts and circumstances surrounding this case. This 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, will at the 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 that 1960 beetle, i 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 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 were above standards. They didnt match outputs found under testing conditions. We know vw tried to justify this discrepancy to regulators with explanations of technical issues and 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 the emissions were still above the legal standards. We know that by july of this year, the epa 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 devise in their cars designed to circumvent emission standards. We know that this defeat device sensed when the vehicles were undergoing emissions testing and ensured emissions control systems were under operating to pass. We know during normal road use, the emissions controls were reduced and the cars were producing up to 40 times more nitrogen oxide than is allowed. We know that half a million cars almost half a million cars in the United States might be affected by this. Mr. Horn, im glad you have come toward to testify here. Because while we know all of the things i just talked about, theres a lot more things we dont know and that we need answers for. For example, vw hasnt revealed 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 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. We have seen the press reports and we can speculate about what happened and why. But until volkswagen comes forward with answers and provides assurances that we can trust about what they are saying, the American People, the regulators and congress are all left in the dark. So i hope, mr. Horn, you have come prepared to answer some of these questions. 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 they are left with cars with higher levels of pollution. They dont have any answers about when or how their car will be fixed or what kind of car they will be left with. Earlier this week, i visited a volkswagen dealership. 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. 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. So thats perhaps the key answer that im looking for today. What do we do moving forward . Mr. Chairman, this subcommittee has been here before. The last 15 years, we have had ford and firestone, toyota, gm and takata before this committee. We were able to get information from all these committees to help us understand what happened. But most importantly, we have 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. Now recognize the chairman of the full committee, gentlemen from michigan, mr. Upton for five minutes. Good morning. Thank you. It makes a car a volkswagen. That ad campaign swept the nation in the 90s. Vw has long enjoyed an almost cultish following dating back to the vw van and the rabbit. Through the years something became rotten and cheating and betrayal became part of the game plan. Theres a lot we dont know about the actions or their motivations in attempting to skirt emissions standards. Regardless of intent, they have betrayed the trust of regulators, dealers and 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 in the 70s at watergate. Now we learn that you knew 18 months ago. So we add, what did you really do to fix it and come clean versus simply going along . Ultimately, the saying rings true. Cheaters never prosper and thats why we are 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 these decisions and why did they for years even as the technology improved continue that path . If they were willing to cut corners here, what else have they done . How will you fix the flaw and when . Will the fix affect the performance of the vehicles . Unraveling these questions will take time. I dont expect that we will discover all the answers today. If vw is serious about rebuilding this broken trust, its leaders will need to demonstrate a serious commitment to answer these and many other questions prompted by its actions. This requires transparency, cooperation and clear, consistent communication not only with this committee, the epa and other ongoing investigations, but also with its customers, suppliers, dealers and general public. Vw will 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 michigan. Every single one of us who has ties to michigan is proud of our rich tradition that is so closely intertwined with the success of the automobile. In fact, michigan is one of several states that have launched their own investigations. All ought mo automakers must ad by gaming system and breaking the law. We will get insight today. But the investigation is just beginning. This hearing is an important step as we receive document, information. New details are certain to emer 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 to protect the public, congress was very clear in our work to protect consumers from abuses from automakers which included steep fines and, yes, criminal prosecution. Vw has betrayed a nation. 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 march sha blackburn. Thank you, mr. Chairman. Mr. Horn, i thank you for being here. 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 and i know that the governor, state legislato legislators, other members of the congressional delegation and i are quite concerned about this. You have got a lot of hard working, honest tennesseans who are at that chattanooga facility. And we are quite concerned about the actions of a few. So a few vw employees, not chattanoo chattanoo chattanoogans. It is as the chairman said its basically 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 failure. And i will also point out, some want to 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. Thank you. Thank you, mr. Chairman, for holding this meeting. Those of you that have talked about the car, my first was a 1957 volkswagen. I think i have everybody beat on that. Listen, there should be zero tolerance for this unethical behavior and flagrant disregard of the u. S. Law. Thats why this hearing is important to us today. The American People need to understand what happened, how it happened and how it will be resolved. They feel in West Virginia they have been deceived. Monday, there was action taken by the attorney general to file action against this. I want to touch on the university West Virginia university used a fraction of the money that we spend with epa, a fraction of the money to make this discovery. They found out, as you know, that 15 one of the cars was 15 to 35 times more emissions than they were allowed. Another was five to 20 times more emissions. Mr. Chairman, i want to touch on the fact that this opportunity about wvu and how Research Dollars can work. This is what was happening. Not the epa, but this was a university able to accomplish this. Im looking forward to this hearing and getting some clarity as to what this is. I thank you very much for holding this 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. We are here today because volkswagen lied. They lied to regulators, to their customers and they lied to the American People. We all have many important questions that deserve answers. What did volkswagen do to its cars, why did they do it and who knew this was happening in germany and here 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 for unexplained cases of sudden, unintended acceleration. Dozens of people died in accidents linked to run away toyota vehicles. Our Committee Held multiple hearings. In the end, it was determined that toyota knew about certain problems with the vehicles that if fixed early would likely have saved lives. In early 2014, we launched an investigation of gm ignition switches that killed many people. Our investigation found that individuals within gm knew about the deadly ignition 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 begin as early as 2008, yet takata continued to investigate whether additional recalls are Still Necessary and takata still has not determined the root cause of the defect which has killed a number of people worldwide and injured hundreds more. Now we have volkswagen, a company that told regulators that their vehicles met emission standards but had installed defeat devices to bypass controlled. They have cheated the system and lied to american customers. This seems to be a pervasive culture of deception in the Auto Industry. It has to stop now. Mr. Chairman, the American People need to know that they are safe on our roads. And they need to know that when they decide to buy a car, they are getting what they paid for. The Auto Industry has deliberately chosen to perpetuate lies and mislead consumers. The American Public are not crash test dummies and cannot be treated as such. Mr. Horn, i understand that you wont have all the answers here today. But please dont hide behind an internal investigation excuse. Its time for volkswagen to be forthcoming about what you did to the cars and why. We deserve an explanation. I would like to yield, mr. Chairman, my time to miss shakowski. Thank you. We will hear a lot from volkswagen today. We will hear apologies, im sure, for the deliberate deception of the American People and federal and state Public Health agencies. We will hear a pledge to get to the bottom of this issue without delay and to fully cooperate with investigators. We will hear how the use of socalled defeat devices are incompatible with volkswagens corporate culture. 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 they are 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. Unless anyone else on this side would like the time, im going to yield back. I yield back. Thank you. Gentleman yields back. I ask consent that the written Opening Statements be introduced into the record and the documented will be entered into the record. Are you aware that the committee is holding an investigative hearing. When do you so, has the practice of taking testimony under oath, mr. Horn. Do you have any objections to testifying under oath . Thank you. The chair then advises you that under the rules of the house and the committee, you are entitled to be advised by counsel. Do you desire to be advised by counsel during your testimony today . In that then in that case, would you please raise your right hand . 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 witness answered yes. You are now under oath and subject to the penalties set forth in title 18, session 1001 of the United States code. You may now give a fiveminute summary of the written statement. Make sure your microphone is on and pulled close so we can hear you. Press the button. Is it on . Okay . Thank you very much. Members of the committee, thank you for inviting me here today to testify before the committee. My name is michael horn. Im president and ceo of Volkswagen Group of america, a subsidiary of volkswagen ag headquartered in germany. I volunteered to come here at the outset of the inquiries in an effort to show our commitment to cooperation. We have not had the opportunity to review all aspects of this matter. 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 best current recollection and information. On behalf of our company and 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 emissions testing regime. In the spring of 2014 when the West VirginiaUniversity 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 peop penalties and that the agency could conduct tests on their own which would include analysis on defeat devices or other equipment. Let me be very clear about this. While 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 agency to resolve the issue. Later in 2014, i was informed that the technical terms had a specific plan for remedies to bring the vehicle into compliance and that they were engaged with the agency about the process. You mentioned this also in your statements. On september 3, 2015, volkswagen ag disclosed at a meeting with the California AirResources Board and the u. S. Epa that emission software in the diesel s vehicles for years 2009 to 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 level of nitrogen oxide. Volkswagens discussions with the regulators, we described to the epa that our emission controlled strategy included the software feature that should be disclosed to and approved by them as an auxiliary control devise. 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 16 vehicles. We are now working with the agent s agency to continue the certification process. I fully agree with this, this is deeply trou lly troubling. We have broken the trust of our employees, dealerships as well as the public and the regulators. Let me be very clear. We take full responsibility for our actions. We are working with all the relevant authorities in a cooperative way. Im here to offer the commitment of volkswagen ag to work with the committee to understand what happened and how we will move forward. Epa, the u. S. Department of justice, state attorneys general as well as other authorities are fulfilling their duties to investigate this matter. We are determined to make things right. This includes accepting the consequences of our acts and restoring the trust. We will rebuild the reputation of a company that more than 2 Million People worldwide, including dealers and supply erders rely upon. Our goal is to develop a remedy for our customers. While much work is still to be done, i would like to talk about how we get from where we are now to the goal. First, we are conducting vest gaths vestigations open how this happened. Investigations have begun. 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 has said, these vehicles do not prevent a safety hazard. Technical teams are working tirelessly to develop remedies for each of the affected group of vehicles. The solutions will be tested and validated and shared with the responsible authorities for approval. There are three groups of vehicles involved each containing the engine. Each will require a different remedy, but they can be our first step to our customers. Fourth, we will skcexamine our Compliance Standards and make certain Something Like this cannot happen again. Fifth, we commit to regular and open communication with our customers, dealers, employees and the public as we move forward. As first steps, we have set up a designated service line website to be a channel for communication. I sent a personal letter to every customer. I can off they are outline of a path forward toward the goal of making things right. Never the l nevertheless, we will be judged by our actions over the coming weeks and months. These events are contrary to volkswagens core principals. They do not reflect the company that i know and to which i have dedicated 25 years of my life. Its inconsistent that this Company Involved in this emissions issue is a company that had 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 fully cooperate with the responsible authorities. We will find remedies for our customers and we will work to ensure that this will never happen again. Thank you for allowing me to testify today. I look forward to your questions. Thank you. Thank you, mr. Horn. I now recognize myself for five minutes of questions. On september 3, 2015, vw admitted that it had installed defeat 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 this is part of the investigation it was installed to this purpose, yes. For this purpose. In your written testimony, you noted that you were made aware of potential emissions compliances in the spring of 2014 . Mmhmm. You also noted discussions at the time about penalties for noncompliance and the epas ability to test for 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 3rd meeting. A couple of day 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 another offroad vehicle. I dont want to name the brand. The results were communicated. In this context i was told by our experts in the office it was just four months into this market that of course, not complying with emission standards is relating to fines and hefty fines specifically here in the u. S. And that those experts, including the German Technology department, would check on the study. The study results, usa mentias mentioned, was a small team. Results have been resulted with the emissions which went overboard and that they will check this. Point two, they would look with all the responsible departments. There was a number in germany and then how to possibly fix this. And then there was the notion in this communication that also the epa or the agencies could check also on their own, which to my degree is 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, mr. Horn. The new chief executive of volkswagen has been quoted in media reports this morning saying only a few people were involved with the deception. I have to say i dont take much comfort in that knowing that volkswagen has been known for superb engineers and mechanics. I wonder, shouldnt they have picked up on this. Isnt it true the tech nnology s installed because the cars could not meet the more stringent emission 1257standards for dies engines . Yes, this appears to be this way. To newspaper articles about possible quotes of mr. Mueller, i dont want to quote. As i said also the investigations are preliminary. One week our Group Provision did the investigation from september 22 to october 1. Then the entire investigation on this matter is turned over to an external agency law firm, american company, which is now going through the systems outside advice, outside council. What we find amazing is that the university of West Virginia discovered this and your army of brilliant engineers and talented mechanics didnt know something was amiss. Im sure we will have more questions about that. I want to ask you this. In terms of vws status for remedying the defeat devices, who is responsible for developing and testing a solution . The responsibility for developing and testing the engine and drive Chain Software lies within the engine and Drivetrain Division in germany for the two cylinder and four cylinder engines. Will this require a Software Patch or changes to the actual vehicles architecture and hardware . Yes, thank you for this question. I think we have to acknowledge into the three groups of cars. You have mentioned roughly 500,000 cars are affected. Out of those around 430,000 cars are the gen1 vehicles, which were the early vehicles. Started here in 2009. For those cars, we believe that software only solution will not be possible because also to be quite frank and logic, you know, it f it would have been possible, they would have done it in the first place. So for those cars, we are working on both software and hardware solutions. There are different strategies about additional catalytic converter as well as a rear tank. This is something which is hardware engineering, which is a little bit its complex and it takes time to develop and to test this. This is one of the strategies. The generation 2 vehicles, which is just the passat model, 90,000 cars here in the u. S. , this will be most probably a software solution. This is tested now and could involve one or the other, lets say, sensor. But whatever explain to you now is being discussed in a timely manner now in the next couple of weeks with the California AirResources Board. For the generation 3 vehicles the actual can i ask i have gone way over time. Im sure other colleagues are going to be asking more detailed questions. We will get to that. I need to yield five minutes recognize for five minutes. Your company acknowledged that it installed these defeat devices on a number of models dating back to 2009, correct . Sorry . I have a problem understanding with all the noise down here. Mr. Chairman, can you please have the quiet in the room so mr. Horn can understand me . Thank you. The room be quiet, especially up front. Thank you. I will ask that again. 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. You can please give us the information when you find out. We will. Thank you very much. You mentioned this West VirginiaUniversity Study that was conducted in may of 2014 which found that the real world emissions on several volkswagen vehicles exceeded epa standards by as much as 35 times. Voluming publication of that study, vw represented that the increased emissions were due to technical issues and unexpected inuse conditions, correct . Im sorry. You guys cough all the time. I have trouble i will ask the question again. Thank you. After that study by West Virginia university, isnt it true that vw 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 to your knowledge, did anybody at the Volkswagen Group of america know at that time that, in fact, those discrepancies were due to these defeat devices when they made those 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 . Mmhmm. 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 at the Volkswagen Group of america know about the existence of these defeat devices when the Company Announced that recall in december 2014 . To my best knowledge today, no. When did you learn of the defeat device and under what circumstances . Around the meeting on september 3rd with epa. Okay. Now, you talked when the chairman asked you about the cars, im concerned about what were going to do about the 500,000 cars we have on the road in the u. S. The first thing is, as you just testified about 430,000 of those cars cannot be fixed by a softwareonly 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 all the aftertreatment systems. Right. And ive got to say ive got to acknowledge my wonderful dealer who is here today. He let me come and talk to his wonderful mechanics on monday. They gave me this chart right here. I tried to take the part itself. But it was too heavy and they told me i would have to probably 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 could 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 that the users can use them and so they can pass the emissions tests . So from this distance, i cant see the chart. But i believe its maybe something out of our service literature or customer literature. Its the exhaust system for these cars. Yes. What can be done to fix that . Theres two scenarios next to the software adjustments and one scenario these are for cars that the software adjustments will not work. Were talking about generation 1 cars, the 430,000 cars . Thats right. The picture you have shown and the treatment software alone doesnt work because otherwise they would have done it. Right. So what are you going to do . Two technical scenarios. Either in the rear tank to put in there or specific catalytic for but those cars dont have the tank right now . No. Thats why it this would be a major fix, correct . Yes, maam. Now, what is the time frame vw has set for that fix . We are still working on the time frame, and its too early to say when the fix exactly is going to take place. Whenallowed to sell the cars . The dealers the issue with the dealers as fred told shave you, we have stopped sale. Right. When is that going to be fixed . Is he going to be able to sell the cars. Theres two scenarios. A, 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. In the meantime, what are the dealers and the 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. With the dealers, we have very early started a program to work with them to also help them financially and to communicate with them. But the 430,000 cars that are already on the road, what are those customers supposed to do . Their cars cannot pass the emissions test. Epa has said and they have repeated this in the statement that these cars are legal and safe to drive. And now there is no indication that they didnt pass any emissions tests. Thank you. Now we need to recognize the chairman of the full committee, mr. Upton. Thank you. I want to go back to this 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. How is this defeat device actually set up so that it was different when an individual drove it down the road versus taking it to a service station and getting the emission sticker that is often required in the states that requires such . So im ive been told a couple things. I want to know if you can walk me through how that could change the emission system. What happens . I can share my best knowledge. Im not an engineer neither a software engineer. Let me try to explain. Let me try to explain. My understanding at this point of time is that the software was designed that the vehicle the software could detect whether it was a Testing Laboratory environment or whether it was on the street. One example of this as experts have explained to me is that the software could detect whether the Steering Wheel made an angel. There will be other parameters whether change maybe the weight of the driver in the seat . I dont think so. Maybe. I dont know. So wouldnt it be easy to develop the software that would just remove that . Yes. This software will be ready when that happens, the car isnt going to meet the emissions test. Regarding the model year 16 and 15 which we are generation 3 cars which we are discussing with the agencies, the defeat device will be either switched off and from january onward will be taken out of the car. Those cars will pass the emissions tests. But the earlier how many vehicles will not pass the emissions test of the ones you have identified . Now the my question so the early you will be able to do that with the later versions, right . But not the earlier versions 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 . Thats your yes. How many of those vehicles are there on the road . We have a total of 500,000. 430,000 generation 1 vehicles, 95,000 generation 2 vehicles and then its around 70,000 generation 1 vehicles. And so, all of these cars are out of the Legal Compliance compleerly. But as epa said, all the cars are legal and safe to drive for the owners. So were not selling the for th owners. 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 quite an inventory i would guess of cars they are now unable to sell. They paid in advance for those under the financing plans that dealers have. And they will not be able to sell them for a number of months. Six months at a minuimum until the fixes can be done. What are you offering in terms of financial incentives, when they have paid for these cars and frankly lost a boat load, i would imagine. Yes. That inventory has got to be a pretty big loss. This is one of the things that troubles we personally very much. We worked very hard and brought profitability up. But i will tell you exactly. On friday, the 18th, the notice was communicated. A call with the dealer counsel. Some of the folks have sitting behind me. We issued our First Financial relief aid. So we put all the tdi, used cars, new cars on free flooring. We paid maximum bonus for each car sold and the Customer Satisfaction targets objectives and paid maximum Customer Satisfaction bonus on those cars. This is more than 1,500 per car. A discretion tphaer fund was wired to the dealers october 1st. I dont want to call out the number. But significant amount of money in order for them to have flexibility. Now accountability towards us. Flexibility to solve the most cases or put the money where they feel it will be fit. When i come out of this congressional hearing we look at the next programs and how can we have the dealers with the cash flow of their cars. Because one thing is is very, very clear. And i am sincere about this. The dealer profitability is my first objective. I said this january 1st and i continue to say this. On friday, we looked very intenseively into the customer remedies. What we need to do for customers. They will be the first scenarios on the table. All right. Thank you. The gentlemans time has expired. Ranking member of the full committee for five minutes. Thank you, mr. Chairman. Your statements so far dont give me much of a fix. You dont have a necessary timetable as to when the fix will begin. 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 you know what you are proposing to do is actually going to work . Whatever i tell you here today is is agreed and 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 the thing is, is it fair to say you really dont know whether you can fix these vehicles to achieve the emission standards . We know we can fix the vehicles to achieve emissions standards. What happened with regard to other things like fuel economy, Engine Performance . People bought these vehicles thinking they were going to have to meet the emission standards, have good fuel economy, good Engine Performance. Can you guarantee that any fix you make to the vehicles doesnt affect fuel economy or Engine Performance or both . At this point in time, my understanding is is if we correct the nitrogen oxide emissions to the emissions standards, the customer will get the mpg later. Thats my current understanding. Whether the full performance of the car, germany may be on top speed. Maybe one or two Miles Per Hour might be missing. But this is of course something we will share with the agencies. But current understanding is that the customer would keep the miles per gallon. The concern i have is when you buy one of these cars you are relying not only on the emissions standards but the fuel economy is good, performance is good. And i think you get to the issue of damages here. In other words, if im an owner and doesnt achieve fuel mileage, i expect to be compensated. It is unfair to the consumers who bought the cars and relied on them because they expected them to perform a certain way. Youre telling me that the fix will guarantee good performance and fuel economy. In achieving the mission standards, the label will be achieved there might be a slight impact on the performance. This is not only the discussions with the agencies but of course we are looking to compensating our customers. Of course in there would be significant differences, this would be part of the discussion. Let me get to another issue. What about the impact on clean air . Theres all kinds of health impacts, asthma, respiratory issues that cancan send people to the hospital or get sick because of nox and other problems. I assume you would agree with that. I have also read the epa statement. In in general, and not specifically to ox, they indicated there might be respiratory problems, im quoting yesterday basically, to hospital visits. What are you going to do to rectify that . Howe are you going to mitigate the harm emitted into the air the last several years . The nox emissions are up to 40 times the allowable limits. What are you going to do with the excess pollution and the impact it may have had . First of all, there are many different studies. So i would like to go back to the epa yesterday of what they said. I think it will be part of the discussion. I would like to point out if you look at 100 of nitrogen oxide of emissions in the u. S. , the car and truck is having 5 . Our group here in the u. S. Has 4 of the 5 , which is. 2 . And out of this 20 is tdi,. 05. We can multiply this, which is not belittling this. It is clearly unaccept knowledge. Within this context, clearly the discussion will come up and needs to be addressed. All right. Thank you. Thank you, mr. Chairman. Thank you, mr. Chairman. Mr. Horn, you said profitability is your top priority when you were speaking. For the dealers, yes. Yes. I would hope that safety, quality, expect are Top Priorities in profitability comes along there as 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 buyback the inventory. Our plan is 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. You have known about this since the spring of 2014. A year and a half. We know about this since september 3rd that the violation is there. And since this time. Since the notice of violation, the board has acted and investigated. You have known there was some activity around this defeat device since 2014, right . No, i did not know it. So you did not know it in the spring of 2014 . No. So you just learned about it september 3rd. Around september 3rd events, yes. Okay. All righty. Lets go to your sixpoint remedy plan. You have talked about the developing remedies. And i would assume if this landed on your plate september 3rd that you all have put all efforts and energy into this plan, correct . Into the remedies . Yes, correct. All right. 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 Something Like this cannot happen again. Uhhuh. So why dont you give us a little bit of specificity on that and what, if any steps, are currently under way to handle these compliance issues. What did you start as of september 3rd, 2015 and what is your timeline . How long is it going to take you to bring this into compliance . Im with Volkswagen Group of america i can only report to you what is managed by headquarters worldwide at the present time. As i said, jones, day manage all the investigations in terms of who did what when, how, and why and what do we need to do to rectify this for the future in terms of compliance adjustments. You are saying as of now you do not have a plan. As of now, we are still in the investigations, yes. Okay. When can 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 trusted in you, to make them whole. Also the individuals that are employed by your facilities, what are they going to have to certainty as it relates to the job. So you all say you are still investigating. So on your timeline, when do you expect that you are going to be able to say, this is the way forward . You mentioned six points. I dont have a timeline for this yet. We are working instantaneously with the and developing plans by the week as we go. And you can ask those folks behind me on whether this works or not. And the customer it depends on the technical remedies. Again, this is generation three, january next year we will start to give the software to the agencies. Generation tool. 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 from the company right now yet in my pocket. So you are certain it is going to be a multiyear plan . Excuse me . You are certain the remedy will end up being a multiyear approach . Yes. If you look at 430,000 cars and the repairs might take 5 to 10 hours in order to fix this. Technical fixes. If you look at your recall history, these actions take one, two years minimum. When the fix is is available for everybody, including parts and discuss with the agencies. Okay. Lets see. My time has expired. I do have wupbl one other question about. 2. I will submit that. Thank you for your time. Thank you very much. Now, i recognize mr. Castor for five minutes. Well, thank you mr. Chairman for calling the hearing. Mr. Horn, according to reports, vws defeat device is found in 500,000 vehicles. Are you confident in that number . Could it be more . Could it be 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 . No, not yet. That is a matter not only of the investigations but the calculations are ongoing. Friday we will look at the first scenarios. Okay. You have called your investigation palestinian. But you have 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 no reason to believe 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, thats correct. So what did you do at that point in time . At that point in time the plan was asked is for from the engineers. And in july 2014, middle of the year presented a plan to me which was, and this is very important also, which was agreed and discussed with the Product Safety Committee worldwide. These are those guys who manage all the recalls, 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. Secondly, with a clear timing when they would get a software fix, which was mentioned in one of the Opening Statements at the end of last year. Do you feel you have been personally deceased after you found out accidentally that the defeat devices yes. Explain that. Look, i worked 25 years for this company. Beyond my personal objective, integrity, quality. And not cheating was always given tore this company. When i learned this, im as touched and moved, sorry, as my employees. And another Group Feeling the effects of the vw defeat defrauding are the employees and hardworking employees. In addition to consumers, dealers are facing, quote, a flood of angry calls, emails, et cetera from volkswagen owners who feel betrayed. They believed they bought a car that polluted less without sacrificing good gas mileage. The performance that comes with a diesel engine. How many dealerships are in the u. S. . We have about 650 vw dealers and 350 audi dealers. On average, how much is is diesel models in. 25 . And now they are the front line for unhappy customers who feel betrayed by the volkswagen brand. Media count said this is the biggest fraud ive ever seen. What do you have to say in response to that . What do you tell the Business Owners and their employees whose livelihoods depend i went out with the dealer calls. I made a video. And the dealers showed it to their children, their families and employees because they said thats the right way to approach 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 already and have discussed this with epa about the timing alongside the dealers will be naturally informed. They are not getting any information right now . Of course they are getting information. Detail that for us. They get the information that we financially will help them through this crisis. Secondly, the first thing we ta talked about is the bonus. They have free flooring. We increased incentives 2,000 for local volkswagen customers for the loyalty program. 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 to dealers . The first two points, the bonus payments and the floor plan is directly to the dealers. The discretionary funds is directly to the dealers. And the incentives are for them. This is a certain cash incent e incentive. Is the intention then for the dealers then to contact customers who have purchased cars since the model year 2009 . Yes. As one of the possibilities, sure. Vw is not giving any direction to dealers and their employees on contacting customers at this point in time . No. Of course. We have set up frequently asked questions. We are guiding the dealers with realtime the same information we have which goes to all call centers as well. Because those have visited the call center in auburn hills. Those people are also front line. They need the same information. As soon as we have it, the other people get it as well. What has vw told dealers how existing volkswagen models will be affected . Cars that dealers have already sold and cars that are now sit issing on the lots . We informed the dealers directly on september 18th. We followed up with letters and videos to do this. Thank you. The gentlemenladys time expired. Now recognize mr. Barton for five minutes. Thank you, mr. Chairman. Thank you for organizing this hearing. I am not a registered professional engineer anymore, but at one time i was. I still am an engineer by training. My daughter drives a volkswagen beetle. Ive always had the highest respect for volkswagen. I think it is a fine company engineeringwise and productwise. But i must tell you, sir, it is extremely disappointing to look at the i dont know the right word to use. The morality of the corporate decision to knowingly and woefully cheat on the u. S. Emissions standards. Volkswagen is one of the premier name brands auto manufacturers in the world. And its a reputation gained the last 50, 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 programs that are meant intentionally to deceive or to cheat on u. S. Emissions standards to me is i wouldnt have believed it if it wasnt factually proven. So my first question to you is im told 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. No board has authorized this. Was a couple of Software Engineers who put this in for whatever reasons. And i would also like to find out. And i fully agree to so. And this is an oversight were hearing. So i assume youre testifying under oath . I am under oath. I understand this, sir. 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. Okay. 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, ie, the president of Volkswagen International, the executive Vice President , whoever your senior daytoday Corporate Officers are, when did they learn of this action . To my understanding, also around the september 3rd 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 that senior level corporate managers and administrators had no knowledge for years and years . I believe it is very hard to believe. And personally i struggle as well. Thats an honest answer. I appreciate that. Well, i dont know what to do, but i do know that you can have is an honorable disagreement about emissions standards, and we have had 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 Corporate should honor the 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. Im going to listen to the rest of the testimony and the questions and the staff recommendations. But in every other case since ive been a congressman when we have had problems with manufacturers, automobile manufacturers, in every case its been something happened that was a mistake, an accident or something they did not see it. That was not the case here. Yes. There was a knowing and willful decision to deceive in one of the most important markets in the world. And that, sir, is just wrong. With that, we agree. Thank you, sir. We will now recognize mr. Kept i did for five years. Thank you, mr. Chairman. Mr. Horn, thank you for being here today. I understand you have said several times your testimony is preliminary and there are investigatio investigations ongoing. I appreciate that and recognize that. I want to go with michigan colleagues went to with regard to the timeline here. My understanding, and from your testimony, is that the spring, specifically may of 2014 is when volkswagen became aware that there were some issue with regards to emissions. Is that right . Yes. And it was from may to disease that car and epa launched investigations into those the emissions. And the company itself, vw, started an investigation as to what led to the oddities, if you will, with regard to the emissions testing, right . I cant answer this really. I know that the actions to remedy these findings were discussed with car and epa. Whether they have undergone under 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 that epa and car continued an investigation after the preliminary report from may and they continued their investigations, then disease 2nd, 2014 vw shared results with epa and car and proposed a recalibration fix. Is that correct . Yes. And then vw initiated a voluntary recall for 500,000 vehicles. May 6th, i believe, car commenced testing to discern whether fix vw proposed equally and accurately fixed the underlying issue. Uhhuh. May 6th through july 2015, car conducted onroad testing to confirm the efficacy of the recall. What im getting at, sir, july 8th, car shared results with epa and vw resulting in technical meetings, from my understanding. According to car in the course of those meetings, vw is disclosed there were several issues that the one, two, and gen three had a second calibration intended to run during only during confirmatory testing. So there was 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 youre referring to, i dont know. I can tell you that the first issue i got to got back to me and my attention was on the 20th of july when my people of Product Marketing came to me and south side we dont get model year 16 diesel certified. Then i wrote an email to dr. Jacob who escalated this. And the explanation of twofold. Either new systems, and i dont know whether this is right. And, b, there is still information missing. So my teams with the National States company did not have this information. Only in the weeks afterwards it started to unfold. And so, sir, if i am understanding the broad aspects of your testimony correctly, essentially, as you have said a times, this was not a company decision. This was a decision made by a number of individuals yet to be ascertained underneath at some other levels of the company that does not affect a corporate decision by the board by yourself. Is that kraurt . Thats my understanding, yes. As number of now, according to press reports this morning, four individuals have been suspended . I dont know. They are press reports. To your knowledge, has anybody been suspended at this point . I cant share names with you. Has anybody as of now, after volkswagen for knowing of some inconsistencies with test results the past 18 monthsings has anybody been suspended or lost their jobs . To my understanding there have been three people suspended but i cannot share the names due to german law. Im not asking for names, sir. This would take one to two years, roughly 430,000 cars. Do you have any estimate at this point as to what the direct loss is for volkswagen would be because of this incident . I think the losses are depending, a, on the fines we will get and we will have to pay. And also, b, on how much money it takes to fix those cars. And, c, on how much money we will have to pay to compensate the customers for what we did. And this is a whole lot of money, im quite sure. Sir, i think the overall question that youre sensing from myself and my colleagues is i understand this was a decision that youre indicating was made by people underneath you. It does get to the overall corporate integrity of the company. What, if you can asay, is going to be done to restore faith in the overall Corporate Structure of volkswagen . First, very important clarification. Incident was not done by people under me. Im the ceo of Volkswagen Group of america. And those things have been developed in the Relevant Software departments in germany, which is totally out of my jurisdiction is or steering. And second, to get your answer hopefully in the right way, with the compliance investigations we have to streamline our processes and we have to this company has to bloody learn and use this opportunity in order to get their act together. And 600,000 people have to be managed in a different way. This is very, very clear. Thank you, sir. Vice chair mr. Mckinley for five minutes. Thank you, mr. Chairman. Several things. The challenged the research that was done. You did knowing then violate is that correct . I dont understand this question, sir. Im sorry. You opted not to challenge or appeal the findings from the wvu. So does that mean you knowingly violated no. No, sir. You did challenge and appeal the wvu findings . I did not challenge because software actions, recalls, service complaints, in the millions for this company is doing business. I was Worldwide Service and parts executive for volkswagen worldwide. I have been to the Product Safety Committee. I know how the system works with all the experts. We got a seal of approval on those actions. I am not the technical expert. There is enough people in the system let me get to the crux of my question. I know the epa fines we just had a situation where a small poultry farm was fined 17,000 a day because they were allowing dust to come out into the neighborhoods. We sawmills 3 million, 5 million until they clean up their discharge into a river. We have coal mines. I think there ought to be consequences for this violation. So im curious i assume you are accruing something on your financial sheets for what could be an expected penalty for having violated the laws here in the United States. Can you share with us or will you share with us what youre accruing on your Balance Sheet for penalties, expected penalties. For the time being, there is no official information that the company has accrued 6. 5 billion euros in the first half of this year. The rest will have to be worked out with specific experts as we have hired enough experts i can tell you. Thank you. When the imports your vehicles are in, you have to provide a certificate of conformity with the epa standards. And the from what i understand the defeat device was not included in that certificate of conformity. Is that correct . Thats my understanding, yes, sir. Can you share with us why someone would try to deceive the American Government . Included in the application of conformity. Because those people who did the applications most probably did not know. Did not know that it was in there. Can can you share with us who is responsible for this failure to include a description . Is this limited to one, two people . We have an office which is called eeo in auburn hills, which is directly linked to the German Research and development department. They work together. They get all the information, all the results, testing, technical specifications. Then they file the applications for conformity. Mr. Horning thank you for testifying. One last question. Weve all been many of us have been talk building this defeat device. For the American People to understand what this is, can you explain what this defeat device is and how it functions. To my understanding, the defeat device is not a device but it is a Software Code in the engine and exhaust system management. And which detects the software with detects whether its on the dino testing environment or on the road being driven. One is the Steering Wheel angle and how many times its been changed. Once a car is on the dino, nothing changes. If it is on the street, the Steering Wheel changes. Since there are so many sensors, this is one of the examples people gave me on how this device, which is a so of wear code again, worked. But hidden in millions of Software Codes. So if you dont know this, very difficult to detect from my limited technical understanding stphrfplt thank y. Thank you. The gentleman yields back. I have in my hand a letter from volkswagen sent to one of my senior staff because she is an owner of your car. I remember when she bought the car and how excited she was about the clean diesel. The letter says your vehicle remains both safe to drive, legal to drive. You do not need to take any action at this time. All we ask is for your patience. I have to tell you, if i were a driver of one of these vehicles thats contributing up to 40 times the amount of emissions i would want that addressed right away. I have a son and a grandchild who regularly uses an inhaler. Im not excited about con treublting to or driving a car that has that kind of emissions. So how much patience is my staff supposed to have . Whats the timeline here . Whats the best scenario and worst scenario in terms of fixing this . Generation 3 is the beginning of next year. Complete fix. For the generation 2 cars it is still underdevelopment. This were wont start, from my judgment, before middle of next year. For the generation 1 cars, which is the biggest fleet, i cannot give you a date right now. Within the next couple of weeks, we will start discussing those scenarios alongside the development guides. These could be on the road for more than a year, lets say . Yes. Or two years . More than a year, definitely. I wanted to follow up on a question that was asked. It sounded like you were saying that the fix could manage fuel economy, Engine Performance and emissions, that all of that could be fixed. If thats so, why didnt volkswagen do that initially . Why wouldnt you make a car that would achieve those goals . I think its a great question. I can only assume that maybe cheating was cheaper. To my understanding, what i have learned, some people have made the wrong decisions in order to get away with something, which will have to be found out. Let me ask you this. Have you considered financial compensation, for example, allowing customers to actually return the car for what they paid for it . This is one of the areas were looking into right now in terms of how to compensate our customers, yes. Providing rebate for lost value of the car . Sure. And what about right now, if i had one of those cars and i wanted a loaner, would you compensate the dealer to give me a loaner instead of having to drive that polluting car . We would have to discuss and consider this. Right now i would say no, honestly. Because the epa has said these cars are legal and safe to drive. And so even though you know that theres up to 40 times more pollution, if i went to my dealer, who might, because theyre in a fix right now, say, okay, well give you a loaner, the company would not do anything to make ultimately your customer happy . So theres a general policy. This is exactly the reason we gave the dealers the discretionary funds in order to help a kcustomers, very signift cases. Whether they do a Loaner Car Program for the specific customer or whether they take them out of the car or whatever they think is best in this particular customer situation they can, yes, no questions asked. But there is no policy where dealers would say they could that loaners would be available. I realize 500,000 loaners would be probably a hard thing to do. You see how that would be a desirable remedy for a lot of people. I understand your point, yes. I want to tell you as a consumer advocate all of my life, this is pretty shocking for people to find out that a company we have had a number of recalls. I have had a recall on one of my cars. But to find out that a company has deliberately cheated it seems to me that asking customers for patience is really not sufficient. I heard people on the radio repeatedly saying, i just want you to back my car and give me the amount of money that i paid for it. I dont want that car. I dont want a fix pause it may not provide exactly what i thought i was buying in the first place. I would hope that your company would consider this as a primary remedy. And i yield back. Thank you. The chair recognizes dr. Burgess for five minutes of question. Thank you, mr. Chairman. And let me just stress that i am as far eye dee logically from jan what cow sky as possible. I am not here to provide you advice, but i think she is giving new advice. I have been through toyota, i have been through general motors. Now we are doing this investigation. And let me just suggest to you and let me just suggest to your Corporate Structure in germany that being disive and minimizing the problem faced by consumers, dealers, suppliers, is not in your best interest and it will hurt you. So i would be aggressively couple compliant and aggressively trying to make it right for your customers, dealers, and suppliers because in the grand scheme of things i think it will be less costly in terms of dollars, in terms of investigation, and in terms of the endurance in the brand in the United States. You have already heard is significant. Our histories with your company all are significant. They go back a significant way. Now that i have that off my chest. Are these vehicles safe to drive . Yes. Epa has said the vehicles are safe to drive. So this is unlike some of the other recalls that we have talked about in this subcommittee, problems with air bags, electronic controls. These do not pose immediate jeopardy to the life of the driver and the passengers. I trust the judgment of the epa, yes. Trusting judgment is kind of what we are doing here today. We are talking that trust factor has been eroded. Let me just ask you. When you stress that you are the ceo for volkswagen of america, is that correct . Yes, sir. But do you travel pwraorbgt to germany from time to time . Too often. Right now, not much. Well, have you been in the month of september. Usually once a month. So as this problem has evolved, or the information about this problem, have you gone to the engineers over in germany and said, guys, whats up here . How did this happen . Have you looked at any lines of Software Code where someone has identified for you this has happened . Or have you held in your hand a defeat device added to an automobile . Personally, i have taken out mr. Mueller out of conference rooms, dr. Leiss and talking to the engineers on how we make this right. To all the questions, how is this possible . Who has done what. They said we didnt know ourselves. Do you understand how that defies credulity. It is is not developed by one person in the pavement in the dark of night. It has to be a teamworking on this. You have the rascals in the epa over here in the United States. We want to do something to be able to sell our cars. Well just trick them. Well just trick them. Somehow you will integrate that into the supply chain of a multinational corporation. And nobody know ace darn thing about it. Thats what youre asking us to believe. You understand why if you have heard it from a number of in credulity, that that could in fact, happen in a multinational corporation. I fully agree, sir. Did you ask that to people superior to you at volkswagen in germany . Who are superior to me, the guy is not on board any longer. Christian klinger. He resigned due to other reasons. I almost dont know what to say. Apparently in Public Domain in the middle part of the last decade, there was some suggestion that volkswagen in an effort to try to sell its diesel high mileage vehicles in this country was in the process of Leasing Software to deal with this emissions problem from another company. Is that correct . Blue Tech Software i believe is the name used. I have read this in the newspapers, yes. Okay. So its in the newspapers. Have you yourself looked at why did they do this and stop the negotiation for the leases . Did we develop technology at volkswagen, did we develop a defeat device at volkswagen . These are questions that are just going to have to be answered. I think we are doing this hearing prior to the time that your document production deadline has expired. So we recognize that you are here voluntarily. All of us represent dealers, consumers, suppliers and their lives and livelihoods are extremely important to us. And thats what we have to keep first and foremost. I yield pack, mr. Chairman. Thank you. And the chair recognizes the gentleman from texas, mr. Green. Thank you, mr. Chairman. For our witness, we have other subcommittees going on. You will see members coming in and out during the day. When i first heard about it, i was amazed that a company thats as great as volkswagen could let this happen. Even to the executives who didnt know. The image of the country in europe and around the world is is so great. Our committee wants to get some answers. I would like to understand more about volkswagens own investigations and your efforts to find the cause of the debacle. Mr. Horn, please explain volkswagens own investigations into this incident and how they are different from each other. The investigations started. I talked yesterday. Group Compliance Order department. And september 29th for one week. Then all the documents, all the preliminary documents were turned over to the American Law Firm jones, day investigating on behalf of our Supervisory Board. News reports discuss several external investigations. So that was the only one you had that was the auditors from september 22nd to the 29th . Are there any other investigations volkswagen is conducting . To my understanding, a after the notice of violation from epa the investigations have started right away. This is what i told you to my best knowledge. I dont know of any other investigations. Do you know if the actions are in the United States or germany or 2bad in both or evere where volkswagen has sold these vehicles. Worldwide. Would you commit to sharing these investigations with the committee, the results of these investigations in. I commit to get as much information as possible to this committee, yes. Thank you. Last week one news outlet said the board met last wednesday to discuss the preliminary findings to probe into the scam. What were the preliminary findings revealed last wednesday . Sorry. Im still confused by the folks down there clicking all the time. Could you repeat your question, please . There is a quote that carmakers Supervisory Board met last wednesday to discuss preliminary findings of an internal probe into the scam. What were the preliminary findings released last wednesday. On our own supervisory advisory, volkswagen ag. I dont have access to these preliminary findings. Can you get a copy of it and share it with your committee . I can definitely try, sir . Pardon . I can try, sir. Okay. You are the ceo. Im the ceo of this company. And then there is a Supervisory Board. And then there is a group of people who are quite above me in germany. And the Supervisory Board has to make this decision. With the commitment our company has, there is a very good chance that the company will provide at one point in time the necessary documents to provide more clarity into the facts here on to this issue. I appreciate you being here voluntarily. But it would be great if we could actually get that in our committee for our investigations. According to september 30th news report, volkswagen Supervisory Board member owe love leiss said, these people who allowed this to happen or made the decision and saw this offer, they are acting criminally. They must take personal responsibility. Mr. Horn, do you agree with that . Yes, sir. Okay. Do i have your full cooperation in investigating the roots of the deception . Sure. Our committee is ongoing, our investigation. I appreciate you being here. Mr. Chairman, ill yield back my time. Thank you. Thank you. For the rest of the members with questions, i know we have a break here in 20 minutes. We have seven people that want to speak. So were going to be very short on the time frame with this. Chair recognizes mr. Griffiths for a short line of questions. Thank you. I appreciate it. As you have heard from others who have owned cars and learned to drive, im one of those as well. My mother was able to afford her first new car, which was a volkswagen square back. Thats what i learned to drive on. It was a manual. I have inherited my grandmothers 72 super beetle, which i still have. In the 80s i drive a rabbit. In the 90s i bought a gaspowered jetta. When it got close to 200,000 miles, my mother convinced me they cant live forever. I bought a gaspowered pa ssat. The people who bought it for me are going to tell me when it crosses 400. They think there wont be any problem in doing that. As a backup to my 2003 passat that was going and going and going like the energier rabbit or bunny, i baltimore a diesel. So everyone else is talking what are consumer thinking in youre looking at him. Im your consumer. Im your volkswagen driver who has always trusted your company, and im very disappointed. So what are we going to do . First you have indicated that you notified the customer. I objected to the previous owner. I bought it from a friend. They have not received any notice that this 2012 diesel passat is affected. When you go to the website, it says the epa that you all received notice from the epa that some of your 2 liter 4 cylinder tdi vehicles dont comply. Among them of course is the 2012. But if i didnt have because im not a skilled like chairman murphy. Im not skilled. I couldnt take a car apart. I had a hard enough time trying to figure out how to get the plastic lid off the engine to try to take a look at it. But when you see that and it says some of the cars are affected and heres one. And the original articles reference 14s and 15s but didnt say anything about 12 or 13. And you see discrepancies relate to vehicles with type ea 189 engine and im looking at my manual and things on the engine block and it doesnt say anything about an ea 189 engine. Now, the team on the committee here and in my staff figured out im affected. We know that. But this was done with great trouble. I have received no letter. I cant tell for sure. And i will tell you what was interesting is we found there was actually a site in the uk. And i know youre just america. And im just talk building america. Where you can actually plug in your vin number and it will tell you if youre affected. While you think you may have notified everybody, not everybody is able to tear apart the engine and see if im ea 189. And they are not able to tell if im a generation 1 or generation 2. If you have a 2012 passat i would think so,n control defect warranty was designed, built, and equipped to conform with all applicable regulations of the United StatesEnvironmental Protection agency epa and is free from defects and material, et cetera. I believe that i was sold something that was different than what it was purported to be. And my friend didnt do the defrauding. It was the volkswagen company. I think youre much better off to come up with a program that buys these cars back. Because, you know, i understand it wasnt your folks in chattanooga that made this mistake. Its the folks in germany. You have to resto stostore trus. One of the ways to do that is to stand behind your vehicle. On my 1990s vehicles, something was wrong with the paint. I took it to First Team Auto mall in roanoke. They took care of it. It was done. Never had another problem. This is a much bigger problem. But volkswagen needs to stand up and say, okay, we understand. We will buy your car back, the fair market vehicle prior to this notice coming out. With that i see my time is up and i yield back. But thank you for being here. Thank you. Thank you. Again, we have 12 minutes. As im asking those, again, to please keep your questions as short. The chair will recognize mr. Yarmouth from kentucky. Thank you, mr. Chairman. Thank you for appearing, mr. Horn. I suspect that i should be feeling a sense today ford escapes and lincoln mkcs are made in my districts and presumably well be selling more while youre out of the marketplace. But im not really taking any joy in any of this. I just have a couple quick questions. The article i read said there were about 1 million vehicles worldwide affected by this. Yes. They contain the defeat device. I guess theres no added cost to put it in since sit a line of computer code. Would that be right . Seems very logical sir. My question is how many countries that these 11 million vehicles were sold in have emission standards that would have been defeated by this device . If the United States were talking half million cars out of 11 million, what are germany emission standards, for instance . Are they stricter than the United States . Theres many countries affected. All the countries in europe are affected. Emission standards in europe are different than the u. S. First of all, nitrogen oxides are much more stringent here. Sit 5 grams i think per mile or whatever. And in europe its 30 to 40. It is in europe. In europe, what is stricter is the diesel particulate emissions. And the european laws are much stricter than the u. S. So my question is would this defeat device, thats in 11 million vehicles, have helped deceive the European Countriess standards as well . I can only give you my understanding at the present time. There are lots of European Countries investigating this, and we are working with those agencies. Also with the german kba, which is the responsible agency. People had to report there. And this is being investigated. Since the standards are different, my understanding is the defeat device is in those cars as well. Whether its really affecting the emissions law, i dont know. I appreciate that answer. And i just want to say before closing it is refreshing to hear my colleagues defending the Clean Air Act. Its a rare occurrence. I yield back. Mr. Collins is recognized for five minutes. Thank you, mr. Again this time one of the last to question you, i guess what ive picked up here, and i hope you can relay back to your board, that the folks running volkswagen back in germany, is that the response so far is inadequate. I would tell you from my perspective, its a sign of arrogance. Its a sign of not admitting yet the severity of your problem. I am an engineer, and i have a way of thinking. And i cannot accept vws portrayal of this as something by a couple of rogue Software Engineers. I would begin by saying, isnt intellectual property, patent work, a very important part of what makes vw, vw . Youre constantly looking for Breakthrough Technology that you can patent . Its a big part of your company, isnt it . You pride yourself on that engineering. So youre having us believe, and i think this is the way an engineers mind works. Back in 2009 you were trying to figure out a way to have clean diesel top performance. And your engineers got stumped. The knox emissions were not even close. Is that true . What is stumped . It was an insurmountable roadblock. They couldnt give emission and performance control at the same time. They were 40 times over the knoxy missiknox emissions. It seems to be logical, what youre saying. I dont know. I know this is a problem, and i have to tell you, this problem was going way up the chain. We cant do it. The knox standards in the u. S. Are not what they need to be. We cant do it. Go work harder, go find a solution. People are coming back, we still cant find a solution. The engineering manager, we cant find a solution. Then all of a sudden, two Software Engineers, like they found pixie dust, come in and say, we found a solution, weve got it, we fixed it. Now youre telling me these two engineers snuck their computer code into the software and no one said, this is Breakthrough Technology, i think we need to run this up the ladder with our attorneys and our engineers, we need to patent this . This is intellectual property thats going to give us an advantage, we can meet the knox standards and the performance standards, and we made a breakthrough, we went from 40 times the emissions to meeting the emissions, and vw is trying to get the United States to believe these are a couple of rogue engineers . I categorically reject that. Either your entire organization is incompetent when it comes to trying to come up with intellectual property, and i dont believe that for a second, or they are complicit at the highest levels in a massive coverup that continues today. Because just the five minutes that ive been here, and as an engineer, and im not a ph. D. My mind immediately jumped to, with this being true, why didnt we look for patents . Why didnt we ask the questions what the pixie dust was that fixed this thing miraculously . This didnt happen in one day or one month. Your engineers were looking at this, i can tell you, for many months. They were stumped, they couldnt come up with it. All of a sudden, the solution is there. And vw is trying to tell us, the United States of america, this congress, that it was a couple of rogue engineers. If thats true, your entire Patent Department should be terminated, because this would have been massive Breakthrough Technology that would have given vw a True Advantage, not by cheating, but a True Advantage in clean diesel technology. I would like you to take that back to your board and have them ask that question. What was going on in the patent world . What was going on in the engineering world . Because i can tell you personally, a category but i reject everything vw is saying about a couple of rogue engineers. And i can tell you that suspending three folks, it goes way, way higher than that. What i would like to conclude with, sir, again, im also a financial guy, im an entrepreneur, i would suggest that you be honest to your shareholders. 6. 5 billion euros is off by an order of magnitude. 500,000 vehicles at 40,000 apiece, if you were to buy those back, and i would suggest you start doing that tomorrow, thats 20 billion there. I would suggest you are off by an order of magnitude. And if you told us today you had set aside 68 billion, i would say youre probably in the ballpark. 6. 8 not even close. With that, mr. Chairman, i yield back. The gentleman yields back. I now recognize mr. Welch for five minutes. Thank you very much. Sir, thank you for coming in. But i just want to express to you some of the things that ive been hearing from vermonters. First of all, weve got vw customers, vw dealers, in red states and blue states, and theyre mad as hell. Some of the questions that came to me from vermonters, and i want to submit this for the record and ask you, vw, to answer these questions from vermonters. Let me just give you a reflection of what these say. Number one, what will you, vw, be reading when youre in jail . Number two, i just wonder what the hell you were thinking. Three, how can we help out vermonters who got these lemons . Four, why should the u. S. Allow you to sell vehicles in this country . Five, vw is the Lance Armstrong of the industry. These questions go on and on and reflect the white heat anger that folks have about the deception. How do you call yourself a member of the human race when you knowingly poisoned the planet . Then i talked to vw dealers. They care about their customers. I know you individually do as well. One dealer said, this is on the scale of enron and bernie may madoff. This is going to be an expense to them because theyre not selling cars that are going to bring pockets. Theyll pay out of their own pocket because theyre local to their employees. I have one major question. Just last week, bp reached a settlement with the Justice Department over the massive 2010 Gulf Oil Spill that killed 11 workers and devastated the environment and the economy of the gulf coast. That settlement allowed bp to shift more than half of its 21 billion fine to the american taxpayer by taking advantage of a loophole in the u. S. Tax code. My view, thats wrong. The wrong doer, not the taxpayer, should pay all of the settlement. And the question i have is this will you commit here today under oath that vw will not use this loophole to write off any future settlement payments related to the fraudulent and deceptive activity to which vw has already admitted . Sir. If you want a clear answer under oath, i would have to really understand these tax loopholes, and i dont understand them. Let me explain it very simply. Bp got to write off about half of the cost of that. And that shifts the burden to the taxpayer instead of their shareholders. My understanding is that we will work very hard in order to get this right and that there should not be a burden to the taxpayers. Should not be. Thank you. Another question, taking up where mr. Collins was, i know you individually are appalled at what happened at vw, and youve asked your question, how did it happen. Someone somewhere made a decision to make it happen. Someone somewhere implemented that decision. Youve asked yourself how that happened, correct . Yes, sir. And your answer to yourself is what . My answer to myself is that i do everything, and i dont sleep at night, to help our dealers, to help our customers, and to be there for my company and my employees to get us through this crisis here in the u. S. I appreciate that. And i know thats true. You individually have a very good reputation, sir. Thank you. But i ask you another question. You know the company. Youve asked yourself who and how. And in your own mind, im asking you to share with us your own view about who and what and how that could happen within the Corporate Structure of vw. This is speculation, if i start now. I have been reading newspapers as well and there have been lots of articles around there. From my personal feeling, this was pressure in the system to get resolutions, and also in conjunction with cost pressure. This was discussed already here, in one of the other instances. I think its dead wrong, if you put corporate profits before people. I think we have to get to the point that we put people first and not the pressure and corporate profits. What people, and what department . My time is up . I yield back. Thank you. I recognize the gentleman from texas. Thank you for joining us today. Obviously a tough situation for your company. Vws actions damaged the trust of the American People as well as the environment for billions around the globe. They have also economically damaged their customers, their dealers, and their shareholders. And i hope that vw will continue to work on the correct and fair resolution of those issues. I want to get more in the weeds now to try to go through and fill in the blanks of the record on some dates and the who, what, where, wh