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VW hood ornaments wait to be attached to cars at the Wolfsburg plant

Secret Language, Old Tech Bog Down VW Probe

April 19, 2016
The probe was expected to wrap up by the end of the month, but has been slowed by outdated computer systems and the general obfuscation of code words like “acoustic software.”

Volkswagen AG investigators are struggling to make headway through data secured from more than 1,500 laptops and other devices and probably won’t have a complete report on the carmaker’s emissions cheating by the end of the month, according to people familiar with the status of the investigation.

The probe, which was expected to wrap up by the end of April, has been slowed by the use of dozens of code words, including “acoustic software,” for the illicit technology Volkswagen used to turn off pollution controls when cars were on the road, said the people, who asked not to be identified because the investigation is confidential. The obfuscation along with partly insufficient and outdated computer systems made it difficult to find evidence concrete enough to hold individual employees accountable, they said.

“We’re in consultations regarding the clarification of the diesel issues,” Volkswagen said in an e-mailed statement. “We’ll comment in the second half of April.”

Nearly every step of VW’s efforts to recover from the cheating scandal has taken more time than expected. The company pushed back its reporting date for last year’s earnings, delayed its shareholders’ meeting and sought a month’s extension on a court deadline for negotiating a solution for rigged cars in the U.S. Most of the 11 million tainted cars are still on the road after a sluggish start to a recall in Europe and as talks in the U.S. remain unresolved.

“Further delays, not higher costs, are the real bear case” for Volkswagen, Stuart Pearson, a London-based analyst with Exane BNP Paribas, said in a note Tuesday. “With deadlines fast approaching, we believe investors would ‘tolerate’ costs of up to 20 billion euros to 25 billion euros ($22.76 billion to $28.45 billion) just to put the issue behind VW.”

In addition to explaining the roots of the crisis, the carmaker needs to hammer out a settlement with U.S. authorities before a court hearing in San Francisco on Thursday. Meanwhile, at a crucial meeting on Friday, the supervisory board plans to discuss the state of investigations, VW’s controversial bonus payments and the anticipated financial hit from the emissions crisis.

Vague and incomplete answers on the origins of the manipulations would sharpen criticism of the company’s handling of the crisis at a time when regulators are deliberating over fines and criminal investigations and civil lawsuits are moving forward. The U.K. plans to publish the results of its probe into emissions testing “shortly,” Helen Bower, spokeswoman for Prime Minister David Cameron, told reporters Tuesday.

Stephan Weil, the prime minister of the German state of Lower Saxony, the company’s second-largest shareholder, had called for a “complete clarification” by this month on how the cheating originated. Volkswagen will hold a press conference to discuss last year’s earnings on April 28 and also plans to report the latest findings of the investigation by then.

The carmaker has so far insisted that a small group of individuals were responsible for the so-called defeat device and that senior management was unaware of the scope of the issue until shortly before it became public on Sept. 18. Former CEO Martin Winterkorn probably missed warning signs including a May 2014 memo, according to a Volkswagen statement last month.

About 450 internal and external investigators have focused on about 20 employees linked to the deception, according to the people familiar with the probe, which is being led by U.S. law firm Jones Day with assistance from Deloitte LP. Weil told lawmakers last week that investigators had done hundreds of interviews.

Proceedings have dragged on because many interviewees were reluctant to provide insight due to fear of the legal consequences, said the people. VW sent about 2,000 so-called litigation hold letters to employees in an effort to prevent data from being deleted.

A full account of the wrongdoing will be critical for Volkswagen to move on from the crisis. VW had planned to provide a comprehensive report on the wrongdoing by its annual shareholder meeting, which was delayed from April 21 to June due to uncertainty over the financial impact of the scandal.

By Christoph Rauwald

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Licensed content from Bloomberg, copyright 2016.

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