[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


     VOLKSWAGEN'S EMISSIONS CHEATING ALLEGATIONS: INITIAL QUESTIONS

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 8, 2015

                               __________

                           Serial No. 114-85
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]



      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov
                        
                                ___________
                                
                      U.S. GOVERNMENT PUBLISHING OFFICE
99-793 PDF                  WASHINGTON : 2016                      
______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].  







                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                 Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                                 7_____

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
DAVID B. McKINLEY, West Virginia     DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
LARRY BUCSHON, Indiana               JOHN A. YARMUTH, Kentucky
BILL FLORES, Texas                   YVETTE D. CLARKE, New York
SUSAN W. BROOKS, Indiana             JOSEPH P. KENNEDY, III, 
MARKWAYNE MULLIN, Oklahoma               Massachusetts
RICHARD HUDSON, North Carolina       GENE GREEN, Texas
CHRIS COLLINS, New York              PETER WELCH, Vermont
KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

                                  (ii)
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     4
    Prepared statement...........................................     6
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     7
    Prepared statement...........................................     8
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    10
    Prepared statement...........................................    11

                               Witnesses

Michael Horn, President and Chief Executive Officer, Volkswagen 
  Group of America...............................................    13
    Prepared statement...........................................    16
    Answers to submitted questions...............................   104
Christopher Grundler, Director, Office of Transportation and Air 
  Quality, Office of Air and Radiation, Environmental Protection 
  Agency.........................................................    54
Phillip Brooks, Director, Office of Civil Enforcement, Air 
  Enforcement Division, Office of Enforcement and Compliance 
  Assurance, Environmental Protection Agency \1\
    Prepared statement \2\.......................................    57
    Answers to submitted questions \3\...........................   121

                           Submitted Material

Subcommittee memorandum..........................................    77
Comments by Vermont residents regarding Volkswagen cheating 
  allegations, undated, submitted by Mr. Welch...................    83
Article of September 28, 2015, ``Who's Minding the Cars?,'' by 
  Kellie Mejdrich, CQ Weekly, submitted by Ms. Castor............    88
Letter of September 18, 2015, from the Air Resources Board to 
  Volkswagen AG, et al., submitted by Mr. Murphy.................    89
Letter of September 18, 2015, from the Environmental Protection 
  Agency to Volkswagen AG, et al., submitted by Mr. Murphy.......    92
Letter of September 29, 2015, from Mr. Upton, et al., to Michael 
  Horn, President and Chief Executive Officer, Volkswagen Group 
  of America, submitted by Mr. Murphy............................    98
Letter of September 29, 2015, from Mr. Upton, et al., to Gina 
  McCarthy, Administrator, Environmental Protection Agency, 
  submitted by Mr. Murphy........................................   101

----------
\1\ Mr. Brooks did not make an oral statement for the record.
\2\ Mr. Grundler and Mr. Brooks submitted a joint written 
  statement for the record.
\3\ The Environmental Protection Agency answered questions 
  submitted to Mr. Grundler and Mr. Brooks.

 
     VOLKSWAGEN'S EMISSIONS CHEATING ALLEGATIONS: INITIAL QUESTIONS

                              ----------                              


                       THURSDAY, OCTOBER 8, 2015

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:01 a.m., in 
room 2123 Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Members present: Representatives Murphy, McKinley, Barton, 
Burgess, Blackburn, Griffith, Bucshon, Flores, Brooks, Mullin, 
Collins, Upton (ex officio), DeGette, Schakowsky, Castor, 
Tonko, Yarmuth, Clarke, Kennedy, Green, Welch, and Pallone (ex 
officio).
    Staff present: Gary Andres, Staff Director; Sean Bonyun, 
Communications Director; Leighton Brown, Press Assistant; 
Rebecca Card, Assistant Press Secretary; Karen Christian, 
General Counsel; James Decker, Policy Coordinator, Commerce, 
Manufacturing, and Trade; Andy Duberstein, Deputy Press 
Secretary; Brittany Havens, Legislative Associate, Oversight; 
Ben Lieberman, Counsel, Energy and Power; Paul Nagle, Chief 
Counsel, Commerce, Manufacturing, and Trade; John Ohly, 
Professional Staff Member, Oversight and Investigations; Tim 
Pataki, Professional Staff Member; Mark Ratner, Policy Advisor 
to the Chairman; Chris Santini, Policy Coordinator, Oversight 
and Investigations; Dan Schneider, Press Secretary; Peter 
Spencer, Professional Staff Member, Oversight and 
Investigations; Dylan Vorbach, Staff Assistant; Greg Watson, 
Legislative Clerk; Christine Brennan, Democratic Press 
Secretary; Jeff Carroll, Democratic Staff Director; Tiffany 
Guarascio, Democratic Deputy Staff Director and Chief Health 
Advisor; Meredith Jones, Democratic Director of Communications, 
Member Services, and Outreach; Rick Kessler, Democratic Senior 
Advisor and Staff Director, Energy and Environment; Chris 
Knauer, Democratic Oversight Staff Director; Una Lee, 
Democratic Chief Oversight Counsel; Elizabeth Letter, 
Democratic Professional Staff Member; and Adam Lowenstein, 
Democratic Policy Analyst.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Thank you, and good morning. We now convene 
this hearing of the Oversight and Investigations Subcommittee 
on Volkswagen Emissions Cheating Allegations: Initial 
Questions.
    Let me start off by saying my first car was a Volkswagen. 
It was a 1976 Volkswagen Beetle. I learned a lot about cars and 
internal combustion engines. I could take that thing apart and 
put it back together, and it actually continued to work. I did 
all the maintenance myself, because the Beetle and the 
Volkswagen had a legacy as the people's 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.
    [Laughter.]
    But I trusted the car to get me around, and I trusted that 
Volkswagen would continue to build a reliable car. That word 
``trust'' alone, as you know, is a key factor in building 
customer loyalty, and that trust is what helped the Volkswagen 
because we believed this company looked out for customers 
first.
    Then, just three weeks ago, car owners around the world 
were shocked to learn that Volkswagen AG, the world's largest 
automaker, admitted that it installed software for a number of 
years in millions of its diesel models that effectively 
defeated emissions controls during routine driving. This news 
followed the Environmental Protection Agency's public 
announcement on September 18th that it had sufficient evidence 
to support allegations that VW was cheating on its emissions 
tests.
    As EPA reported at the time, when the cars were subject to 
emissions testing, the diesel vehicles switched into an 
operational mode designed specifically to pass the test and, 
then, switched back to a different mode during normal driving, 
a mode that emitted nitrogen oxides up to 10 and 40 times the 
Federal limits.
    In the United States alone, some 482,000 Volkswagen and 
Audi models were affected by the cheating software. Worldwide 
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 a bipartisan 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 morning's hearing we will receive testimony from 
the head of Volkswagen's American operations, Mr. Michael Horn, 
and from EPA officials tasked with ensuring the automobiles on 
American roads meet Federal environmental standards.
    In addition, this subcommittee intends to pursue answers to 
critical initial questions concerning the troubling revelations 
about VW's actions, what happened, who was involved, and, most 
importantly, why.
    Let me acknowledge that Mr. Horn is appearing before us 
voluntarily today, and I can say that I expect that he and the 
Volkswagen organization will continue to cooperate with our 
inquiry. This means providing documents and information to the 
committee as quickly as possible, including documents that have 
already been discussed publicly in connection with Volkswagen's 
various Board meetings in Germany.
    As I said before, there are a number of core questions that 
we will begin to pursue today, both for Volkswagen and for the 
EPA, most critically, what happened, who was involved, why were 
these actions taken. We also have a number of questions 
concerning the impact of these decisions on customers, family-
owned dealerships, and the American public.
    I hope today Mr. Horn can provide some important context 
for us and expand upon the facts he represents in his 
testimony. We will look to him to explain the current 
understanding of VW executives about what exactly was done to 
these engines and was it done to deliberately deceive 
Government regulations and regulators. And what is VW doing to 
fix the problem and make whole those who have been affected by 
the actions.
    At some point prior to 2009, VW made a choice to move 
forward with engines that evidence now suggests were not 
compliant with U.S. emissions standards. The illegal software 
was initially deployed in the first generation of these diesel 
engines, which account for approximately 340,000 of the 
affected vehicles. However, despite apparent advancement in 
their emissions control systems in two future generations of 
these engines, the software remained in place. And if the 
technology was improving, what did the company understand about 
the software cheat and what does this mean for fixing these 
vehicles? Will some be easier than others?
    Of course, for EPA, we have questions about its compliance 
and recall programs. I hope we can get some clear answers today 
from that agency. Why did EPA standard compliance tests and 
audits fail to detect problems, especially in older technology? 
What is EPA doing to ensure any fix it requires of the 
automaker does not negatively affect vehicle performance?
    There is some need for a sense of proportion regarding this 
matter. The 480,000 or so VW vehicles implicated in this 
scandal represent only .2 percent of the cars and light trucks 
on the United States highways. And so far, we have no evidence 
that the software similar to what was used by VW is present in 
any other U.S. vehicles.
    The EPA's ongoing testing will help address this question, 
but I hope our witnesses from VW and EPA can understand where 
confidence has been shaken. At root, the behavior to which VW 
admitted represents a fundamental violation of public trust, 
and reverberations of this violation can be seen across the 
United States and across the world, as people grapple with the 
implications.
    We need to develop a clear understanding of the facts and 
circumstances surrounding this case, and this hearing will be a 
first important step towards that goal.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    Just under three weeks ago, car owners around the world 
were shocked to learn that Volkswagen AG, the world's largest 
automaker, admitted that it had installed software for a number 
of years in millions of its diesel models that effectively 
defeated emissions controls during routine driving.
    This news followed the Environmental Protection Agency's 
public announcement on September 18th that it had sufficient 
evidence to support allegations that VW was cheating on its 
emissions tests.
    As EPA reported at the time, when the cars were subject to 
emissions testing, the diesel vehicles switched into an 
operational mode designed specifically to pass the tests, and 
then switched back to a different mode during normal driving-a 
mode that emitted nitrogen oxides up to 10 and 40 times the 
Federal limits.
    In the United States alone, some 482,000 Volkswagen and 
Audi models were affected by the cheating software. Worldwide, 
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 a bi-partisan 
investigation to get answers for the American public. This 
investigation will seek to understand the facts and 
circumstances surrounding VW's actions, the impact of its 
decisions, and related issues about emissions compliance 
generally.
    At this morning's hearing we will receive testimony from 
the head of Volkswagen's American operations, Mr. Michael Horn, 
and from EPA officials tasked with ensuring the automobiles on 
American's roads meet Federal environmental standards. In 
addition, this subcommittee intends to pursue answers to 
critical initial questions concerning the troubling revelations 
about VW's actions-what happened; who was involved; and most 
important, why?
    Let me acknowledge that Mr. Horn is appearing before us 
voluntarily today and say that I expect that he and the 
Volkswagen organization will continue to cooperate with our 
inquiry. This means providing documents and information to the 
committee as quickly as possible, including documents that have 
already been discussed publicly in connection with Volkswagen's 
various board meetings in Germany.
    As I said before, there are a number of core questions we 
will begin to pursue today, both for Volkswagen and for EPA. 
Most critically: what happened; who was involved; and why were 
these deceptive actions taken? And we also have a number of 
questions concerning the impact of these decisions on 
customers, family-owned dealerships, and the American public.
    I hope today Mr. Horn can provide some important context 
for us and expand upon the facts he represents in his 
testimony. We will look to him to explain the current 
understanding of VW executives about what exactly was done to 
these engines, and was it done to deliberately deceive the 
Government regulators? And what is VW doing to fix the problem 
and make whole those who have been affected by its actions?
    At some point prior to 2009, VW made a choice to move 
forward with engines that evidence now suggests were not 
compliant with U.S. emissions standards. The illegal software 
was initially deployed in a first generation of these diesel 
engines which account for approximately 340,000 of the affected 
vehicles. However, despite apparent advancements in their 
emissions control systems in two future generations of these 
engines, the software remained in place. If the technology was 
improving, what did the company understand about the software 
cheat? And what does this mean for fixing these vehicles? Will 
some be easier than others?
    Of course, for EPA we have questions about its compliance 
and recall programs. I hope we can get some clear answers today 
from that agency. Why did EPA's standard compliance tests and 
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 of proportion regarding this 
matter. The four hundred eighty thousand or so VW vehicles 
implicated in this scandal represent only .2% of the cars and 
light trucks on U.S. highways and so far we have no evidence 
that software similar to what was used by VW is present in any 
other U.S. vehicles. EPA's ongoing testing will help address 
this question. But I hope our witnesses from VW and EPA can 
understand why our confidence has been shaken.
    At root, the behavior to which VW admitted represents a 
fundamental violation of public trust. And the reverberations 
of this violation can be seen across the United States and 
across the world as people grapple with the implications. We 
need to develop a clear understanding of the facts and 
circumstances surrounding this case. And this hearing will be a 
first, important step towards that goal. I now recognize the 
ranking member of the subcommittee, Ms. DeGette, for 5 minutes.

    Mr. Murphy. I now recognize the ranking member of the 
subcommittee, Ms. DeGette, for 5 minutes.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you, Mr. Chairman.
    In the spirit of bipartisanship of this investigation, I 
will tell you my first car was also a Volkswagen. It was a 1960 
VW Beetle with a ragtop sunroof that I inherited from my 
grandmother. And I will tell you that that 1960 Beetle, I still 
miss that car. It didn't have any lines of computer code 
required to operate that vehicle.
    In this situation, fast forward to today, we know some 
things, but we don't know enough. And that is why I am glad we 
are having this investigation.
    We know that in May 2014 West Virginia University published 
a study commissioned by the International Council on Clean 
Transportation that found that on-road emissions from 
Volkswagen cars were well above VW standards. They also did not 
match the emissions outputs found under testing conditions.
    We know that VW tried to justify this discrepancy to 
regulators with explanations of technical issues and unexpected 
in-use 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 Air Resources Board tested the fixed vehicles, they 
found that the emissions were still above the legal standards.
    And we know that, by July of this year, the EPA and CARB 
told VW that they would not approve the company's 2016 model 
year diesel vehicles for sale unless the emissions could be 
explained. VW was essentially forced to come clean, and they 
ultimately confessed that they had installed a defeat device in 
their diesel cars designed to circumvent EPA emission standard 
for certain air pollutants.
    We know that this defeat device sensed when the vehicles 
were undergoing emissions testing and ensured emissions control 
systems were operating to pass. And we know that during normal 
road use the emissions controls were reduced and the cars were 
producing up to 40 times more nitrogen oxide than is allowed by 
emissions standards. We know that almost half a million cars in 
the United States might be affected by this.
    Now, Mr. Horn, I am glad you have come today to testify 
here because, while we know all of the things I just talked 
about, there are a lot more things we don't know and that we 
need answers for. For example, VW hasn't revealed how the 
defeat device affects the engine, why it was installed, and how 
it was able to evade emissions tests. You haven't revealed when 
and how the engines equipped with this defeat device will be 
fixed. You haven't told us whether this fix will affect fuel 
economy or performance of the vehicles.
    You haven't 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 haven't 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 haven't revealed who is responsible for this scheme. We 
don't know if it came from Germany and who knew about it in the 
United States.
    Now we have all seen the press reports, and we can all 
speculate about what happened here and why. But, until 
Volkswagen comes forward with some answers and provides some 
assurances that we can trust about what they are saying, the 
American people, the regulators, and Congress are all left in 
the dark. So, I hope, Mr. Horn, that you come prepared to 
answer some of these questions, and I also hope that VW will be 
prepared to work with this committee as we move forward.
    Hundreds of thousands of owners invested money and trust in 
VW. Many of them bought those cars specifically because they 
were seeking environmentally friendly vehicles. Now they are 
left with cars with much higher levels of pollution. They don't 
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 in 
Denver. I saw the pollution control equipment on VW diesel 
vehicles firsthand. These cars account for almost 25 percent 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 can't sell them, these cars are just 
sitting on the lots, which is a scene that is being repeated 
across the country. So, as, Mr. Chairman, you say, it is a 
small percentage of all the cars on the road in the U.S., it is 
a tremendous economic impact to these dealers and, also, to the 
consumers who don't know what is going to happen to their cars. 
And so, that is perhaps the key answer that I am looking for 
today: what do we do moving forward?
    Now, Mr. Chairman, this subcommittee has been here before. 
In 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 companies 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 what is 
happening, and I hope that they will get beyond this series of 
terrible decisions and do something to restore the public 
trust.
    Thank you, and I yield back.
    [The prepared statement of Ms. DeGette follows:]

                Prepared statement of Hon. Diana DeGette

    Mr. Chairman, thank you for calling this important hearing.
    Here is what we know so far:
    We know that in May 2014, West Virginia University 
published a study commissioned by the International Council on 
Clean Transportation that found that the on-road emissions from 
Volkswagen's cars were well above EPA standards. They also did 
not match the emissions outputs found under testing conditions.
    We know that VW tried to justify this discrepancy to 
regulators with explanations of technical issues and unexpected 
in-use conditions.
    We know that in December 2014, VW initiated a voluntary 
recall of nearly 500,000 vehicles to resolve, among other 
things, the emissions issues. Yet, when the California Air 
Resources Board tested the ``fixed'' vehicles, they found that 
the emissions were still far above the legal standards.
    We know that by July of this year, EPA and CARB told VW 
that they would not approve the company's 2016 model year 
diesel vehicles for sale unless these emissions issues could be 
explained.
    VW was forced to come clean, and they ultimately confessed 
that they had installed a ``defeat device'' in their diesel 
cars designed to circumvent EPA emissions standards for certain 
air pollutants.
    We know that this defeat device ``sensed'' when the 
vehicles were undergoing emissions testing and ensured 
emissions control systems were operating to pass. We know that 
during normal road use, the emissions controls were reduced and 
that the cars were producing up to 40 times more nitrogen oxide 
than is allowed by emissions standards.
    We know that almost half a million cars in the United 
States may be affected.
    VW hasn't revealed how the defeat device affects the 
engine, why it was installed, and how it was able to evade 
emissions tests.
    You haven't revealed when and how the engines equipped with 
this defeat device will be fixed. And you haven't told us 
whether that fix will affect the fuel economy or performance of 
the vehicles.
    You haven't revealed what Volkswagen told regulators over 
the last year as EPA and CARB were trying to figure out why 
these vehicle's emissions were out of compliance.
    You haven't revealed whether the voluntary recall that VW 
set in place in 2014 was really a ruse. Was 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 haven't revealed who is responsible for this scheme. We 
don't know who knew about it in Germany and who knew about it 
in the United States.
    We have all seen press reports and we can speculate about 
what happened here and why. But until Volkswagen comes forward 
with some answers--and provides some assurances that we can 
trust what they're saying--the American people, the regulators, 
and Congress are left in the dark. So Mr. Horn, I hope you have 
come prepared to answer some of these questions today.
    Hundreds of thousands of owners invested money and trust in 
VW. Many bought them seeking environmentally friendly vehicles.
    Now they are left with cars belching much higher levels of 
pollution. They don't 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 in 
Denver. I saw the pollution control equipment on VW diesel 
vehicles firsthand. These cars account for a significant 
percentage of sales at VW dealerships in Colorado. Now, scores 
of these cars are just sitting on lots--a scene repeated across 
the country.
    Mr. Horn, I hope you have answers for drivers and for 
dealers about what they should do with these cars moving 
forward.
    Mr. Chairman, this subcommittee has been here before. In 
the last fifteen years, we have hauled Ford and Firestone, 
Toyota, GM, and Takata before this committee. We were able to 
get information from all those companies to help us understand 
what happened in their vehicles. But more importantly, we have 
used this information to chart a path forward and help the 
consumers affected by these events.
    I hope that Volkswagen can similarly tell us today what is 
happening in their diesel cars and how they intend to fix it.
    Volkswagen made a series of terrible decisions and has 
broken the public trust. Today, we need some answers so we can 
ensure that this will never happen again.

    Mr. Murphy. The gentlelady yields back.
    I now recognize the chairman of the full committee, the 
gentleman from Michigan, Mr. Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Good morning. Thank you, Mr. Chairman.
    Fahrvergnugen, 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 Beetle, VW Van, 
and the Rabbit. But, through the years, something apparently 
became rotten in Wolfsburg, and cheating and betrayal became 
part of that game plan.
    There is a lot that we don't know about VW's actions or 
their motivations in attempting to skirt emission standards. 
But, 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 back in the seventies at Watergate. Now we 
learn that you knew some 18 months ago. So, we add, what did 
you really do to fix it and come clean versus simply going 
along?
    Ultimately, this saying rings true: cheaters never prosper. 
And that is why we are here today. We have many questions about 
how we got here and the road ahead. Why would one of the 
world's 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 these vehicles? Unraveling these 
questions will take time, and I don't expect that we are going 
to discover all the answers today. But if VW is serious about 
rebuilding this broken trust, its leaders will need to 
demonstrate a serious commitment to 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 the general public. VW will inevitably 
pay a steep price for this dirty little secret. How it responds 
to the failure will go a long way to rebuilding or further 
eroding the public's trust.
    VW must also consider what implications these actions have 
for the thousands of Americans that it employs, including their 
facility in Auburn Hills, 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 automakers must advance by 
imagination and innovation, not by gaming the system and 
breaking the law.
    We will get some additional insight today, but the 
committee's investigation is just beginning. This hearing is an 
important step. As we receive documents and information, new 
details are certain to emerge. I look forward to getting to the 
bottom of this issue as quickly as possible.
    I take this very personally. As the author of the TREAD Act 
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. It is time to 
clean it up or get off the road.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Fahrvergnugen--it's what makes a car a Volkswagen. That ad 
campaign swept the Nation in the 1990s. Volkswagen has long 
enjoyed an almost cultish following dating back to the Beetle, 
VW van, the Rabbit. But through the years something apparently 
became rotten in Wolfsburg, and cheating and betrayal became 
part of the VW game plan.
    There is a lot we still do not know about Volkswagen's 
actions, or their motivations, in attempting to skirt emissions 
standards. But regardless of intent, they have betrayed the 
trust of regulators, dealers and, most importantly, the driving 
public.
    The most famous congressional hearing question is: ``what 
did you know and when did you know it?'' asked by Senator 
Howard Baker. Now we learn you knew some 18 months ago. So we 
add: What did you really do to fix it and come clean versus 
simply going along? But, ultimately, the saying rings true: 
cheaters never prosper. That's why we are here today.
    We have many questions about how we got here, and the road 
ahead. Why would one of the world's 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? If they were willing to cut 
corners here, what else have they done? How will you fix this 
flaw and when? Will the fix affect the performance of these 
vehicles?
    Unraveling these questions will take time and I do not 
expect we will discover all the answers today. But if VW is 
serious about rebuilding this broken trust, its leaders will 
need to demonstrate a serious commitment to 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 the general public.
    VW will inevitably pay a steep price for its dirty little 
secret. How it responds to this failure will go a long way to 
rebuilding, or further eroding, the public's trust. VW must 
also consider what implications these actions have for the 
thousands of Americans it employ, including at their facility 
in Auburn Hills, 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. Recent reports are sickening, and cannot be 
tolerated. All automakers must advance by imagination and 
innovation--not by gaming the system and breaking the law.
    We will get some additional insight today but the 
committee's investigation is just beginning. This hearing is an 
important step. As we receive documents and information, new 
details are certain to emerge. I look forward to getting to the 
bottom of these issues as quickly as possible. I take this very 
personally. As the author of the TREAD Act to protect the 
public, Congress was clear in our work to protect consumers 
from abuses from automakers.
    Volkwagen has betrayed a nation--a nation of regulators, 
loyalists, and innocent customers. Either clean it up, or get 
off the road.

    Mr. Upton. I yield the balance of my time to Marsha 
Blackburn, the vice chairman.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Mr. Horn, thank you for being here, and I think it is 
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.
    I am fully aware that our Governor has been at the 
Chattanooga facility. And I know that the Governor, State 
legislators, the other members of the congressional delegation, 
and I are quite concerned about this. You have got a lot of 
hard-working, honest Tennesseans who were at that Chattanooga 
facility, and we are quite concerned about the actions of a 
few, a few VW employees, not Chattanoogans and not Tennesseans.
    We are going to be very precise with you and VW. It is, as 
the chairman said and as Chairman Murphy has said, it is 
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 to overburdened to 
have noticed this?
    This is a systemic failure. And I will also point out some 
want to say it is a safety issue. No, sir, this is an issue of 
integrity.
    So, we appreciate that you are here. We look forward to 
hearing from you.
    And I want to yield the balance of my time to the vice 
chair of the subcommittee, Mr. McKinley.
    Mr. McKinley. Thank you.
    And thank you, Mr. Chairman, for ordering this meeting. 
Others of you have talked about the car. My first was a 1957 
Volkswagen. I think I have got everybody beat on that.
    But, listen, there should be zero tolerance for this 
unethical behavior and flagrant disregard of the U.S. laws, 
public health, and the consumer. That is why this hearing is 
important to us today. The impaired people need to understand 
what happened, how it happened, and how it will be resolved.
    And they feel in West Virginia that they have been 
deceived. So, on Monday there was action taken by the attorney 
general to file action against this.
    I also just want to touch on the University. At West 
Virginia University they use a fraction of the money that we 
spend with EPA, just a fraction of the money, to make this 
discovery. And they found out, as you know, that one of the 
cars that they tested was 15 to 35 times more emissions than 
they were allowed. Another was 5 to 20 times more emissions.
    So, Mr. Chairman, I want to touch on the fact that this 
opportunity about WVU and what its research, how research 
dollars can work. And this is what happened--not the EPA, but 
this was a university that was able to accomplish this.
    So, I am looking forward to this hearing and getting some 
clarity as to what this is. I thank you very much for holding 
this session----
    Mr. Murphy. Thank you.
    Mr. McKinley [continuing]. And look forward to the 
conversation.
    Mr. Murphy. Thank you.
    We now recognize the ranking member of the committee, Mr. 
Pallone, for 5 minutes.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Mr. Chairman, thank you for holding this 
hearing.
    We are here today because Volkswagen lied. They lied to 
regulators, they lied 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, both in Germany and here in the United 
States?
    This whole scheme makes me question how much we should 
trust Volkswagen. To be honest, this committee's investigations 
over the last 5 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 Toyota's recall of 9 
million vehicles worldwide for unexplained cases of sudden 
unintended acceleration. Dozens of people died in accidents 
linked to runaway Toyota vehicles. Our committee held multiple 
hearings and, in the end, it was determined that Toyota knew 
about certain problems with their vehicles that, if fixed 
early, would likely have saved lives.
    In early 2014, we launched an investigation of General 
Motors' ignition switches that killed many people. Our 
committee's 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 began as early as 2008. Yet, 
Takata and NHTSA 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.
    And now, we have Volkswagen, a company that told regulators 
that their vehicles met emission standards, but had actually 
installed defeat devices to bypass emission controls.
    Over the past 5 years, the world's three largest automakers 
have come before this committee to admit that they have cheated 
the system and lied to American customers. This seems to be a 
pervasive culture of deception in the auto industry, and 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 actually getting what they paid 
for. The auto industry has deliberately chosen to perpetuate 
lies and mislead consumers, but the American public are not 
crash-test dummies and cannot be treated as such.
    Mr. Horn, I understand that you won't have all the answers 
here today, but please don't hide behind an internal 
investigations excuse. It is time for Volkswagen to be 
forthcoming with its customers, regulators, and Congress about 
what you did to these cars and why. We deserve an explanation.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    Mr. Chairman, thank you for holding this hearing. We are 
here today because Volkswagen lied. They lied to regulators. 
They lied to their customers. And they lied to the American 
public.
    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, both in Germany and here in the U.S.?
    This whole scheme makes me question how much we should 
trust Volkswagen. And to be honest, this committee's 
investigations over the last 5 years make me question how much 
we should trust the auto industry.
    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 Toyota's recall of 
nine million vehicles worldwide for unexplained cases of sudden 
unintended acceleration. Dozens of people died in accidents 
linked to runaway Toyota vehicles. Our committee held multiple 
hearings and in the end, it was determined that Toyota knew 
about certain problems with their vehicles that if fixed early 
would likely have saved lives.
    In early 2014, we launched an investigation of General 
Motors' ignition switches that killed many people. Our 
committee's 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 began as early as 2008, yet 
Takata and NHTSA continue to investigate whether additional 
recalls are still necessary. Takata still has not determined 
the root cause of the defect, which has killed a number of 
people worldwide and injured hundreds more.
    And now, we have Volkswagen. A company that told regulators 
that their vehicles met emission standards, but had actually 
installed defeat devices to bypass emission controls.
    Over the past 5 years, the world's three largest automakers 
have come before this committee to admit that they have cheated 
the system and lied to American consumers. There seems to be a 
pervasive culture of deception in this industry and it is 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 actually getting what they paid 
for. The auto industry has deliberately chosen to perpetuate 
lies and mislead consumers. But the American public are not 
crash test dummies and cannot be treated as such.
    Mr. Horn, I understand that you won't have all the answers 
here today. But please don't hide behind an internal 
investigations excuse. It is time for Volkswagen to be 
forthcoming with its customers, regulators, and Congress about 
what you did to these cars and why. We deserve an explanation.
    I yield my remaining time to Rep. Schakowsky.

    Mr. Pallone. And I would like to yield, Mr. Chairman, my 
remaining time to Ms. Schakowsky.
    Ms. Schakowsky. Thank you for yielding, Mr. Ranking Member.
    We will hear a lot from Volkswagen today. We will hear 
apologies, I'm sure, for Volkswagen's 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 so-called defeat devices is 
incompatible with Volkswagen's corporate culture. And I want to 
tell you, Mr. Horn, I don't buy it.
    The American people, the EPA, and their counterparts around 
the world have been defrauded by Volkswagen. The company's word 
isn't 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 shouldn't 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.
    Mr. Pallone. Thank you, Mr. Chairman.
    Unless anyone else on this side would like the time, I am 
going to yield back. I yield back, Mr. Chairman.
    Mr. Murphy. Thank you. The gentleman yields back.
    I also ask unanimous consent that the written opening 
statements by other members of the committee be introduced into 
the record, and without objection, the documents will be 
entered into the record.
    You are aware that the committee is holding an 
investigative hearing, and when doing so, has the practice of 
taking testimony under oath, Mr. Horn. Do you have any 
objections to testifying under oath?
    Mr. Horn. No.
    Mr. Murphy. Thank you.
    The Chair then advises you that, under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do you desire to be advised by counsel 
during your testimony today?
    Mr. Horn. No.
    Mr. Murphy. Then, in that case, will you please raise your 
right hand and I will swear you in? Stand and raise your hand.
    [Witness sworn.]
    Mr. Murphy. Thank you.
    Let the record show the witness answered yes. You are now 
under oath and subject to the penalties set forth in Title 18, 
Section 1011 of the United States Code.
    You may now give a 5-minute summary of your written 
statement. If you will please make sure your microphone is on 
and pull it close to you, so we can hear you? You have to press 
the button. Is it on?

   STATEMENT OF MICHAEL HORN, PRESIDENT AND CHIEF EXECUTIVE 
              OFFICER, VOLKSWAGEN GROUP OF AMERICA

    Mr. Horn. Thank you very much, Chairman Upton, Chairman 
Murphy, Ranking Member Pallone, Ranking Member DeGette, other 
members of the committee. Thank you for inviting me here today 
to testify before the committee.
    My name is Michael Horn, and I am president and CEO of 
Volkswagen Group of America, a subsidiary of Volkswagen AG, 
headquartered in Germany, in Wolfsburg.
    I volunteered to come here before this committee at the 
very outset of these inquiries in an effort to show our 
commitment to cooperation. We have not had the opportunity to 
review all aspects of this matter. Indeed, the investigation is 
just beginning. Therefore, my testimony and my answers to your 
questions will, 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 Volkswagen's use of a software program that served 
to defeat the regular emissions testing regime.
    In the spring of 2014, when the West Virginia University 
study was published, I was told that there was a possible 
emissions noncompliance that could be remedied. I was informed 
that EPA regulations included various penalties for 
noncompliance with the emissions standards and, also, that the 
agency could conduct engineering tests on their own which could 
include analysis on defeat devices or other auxiliary 
equipment.
    Let me be very clear about this: 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 agencies to resolve the issue. Later in 2014, I was 
informed that the technical teams had a specific plan for 
remedies to bring the vehicle into compliance and that they 
were engaged with the agencies about the process. And you 
mentioned this, also, in your statements.
    On September 3rd, 2015, Volkswagen AG disclosed at a 
meeting with the California Air Resources Board and the U.S. 
Environmental Protection Agency that emission software in four-
cylinder diesel vehicles for model years 2009 until 2015 
contained a defeat device in the form of hidden software that 
could recognize whether a vehicle was being operated in a test 
laboratory or on the road. The software made those vehicles 
emit high levels of nitrogen oxides when the vehicles were 
driven in actual road use rather than laboratory testing.
    In Volkswagen's recent, ongoing discussions with the 
regulators, we described to the EPA and CARB that our emissions 
control strategy also included a software feature that should 
be disclosed to and approved by them as an Auxiliary Emissions 
Control Device, which is also called AECD, in connection with 
the certification process. As a result, in order to show that 
we acted immediately, we have withdrawn the application for 
certification for all model year 2016 vehicles and we are now 
working with the agencies to continue the certification 
process.
    These events--and I fully agree on this--are deeply 
troubling. I did not think that something like this was 
possible at the Volkswagen Group. We have broken the trust of 
our customers, dealerships, employees, as well as the public 
and the regulators. And let me be very clear. We at Volkswagen 
take full responsibility for our actions and we are working 
with all the relevant authorities in a cooperative way.
    I am here to offer the commitment of Volkswagen AG to work 
with this committee to understand what happened and how we will 
move forward. EPA, CARB, the U.S. Department of Justice, State 
attorneys general, as well as other authorities are fulfilling 
their duties to investigate this matter, and we are determined 
to make things right.
    This includes accepting the consequences of our acts, 
providing a remedy, and beginning to restore the trust of our 
customers, dealerships, employees, the regulators, and the 
American public. We will rebuild the reputation of a company 
that more than 2 million people worldwide, including dealers 
and suppliers, rely upon for their livelihoods.
    Our immediate goal is to develop a remedy for our 
customers. While much work is still to be done, I would like to 
talk today about how we get from where we are now to that goal.
    First, we are conducting investigations on a worldwide 
scale on how these matters could have happened. Responsible 
parties will be identified and held accountable. Thorough 
investigations have already begun, but any information 
development at this stage is preliminary. We ask for your 
understanding as we complete this work.
    Second, it is important for the public to know that, as the 
EPA has said, these vehicles do not present a safety hazard and 
remain safe and legal to drive.
    Third, technical teams are working tirelessly to develop 
remedies for each of the affected group of vehicles. These 
solutions will be tested and validated and, then, shared with 
the responsible authorities for approval.
    There are three groups of vehicles involved, each 
containing one of the three generations of the two-liter diesel 
engine. Each will require a different remedy, but these 
remedies can only be our first step to our customers.
    Fourth, we will examine our compliance processes and 
standards at Volkswagen and adopt measures to make certain that 
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. And as first steps, we have set up a designated 
service line, Web site, micro-site, to be a channel for this 
communication. And I have sent a personal letter to every 
affected customer.
    I can offer today this outline of a path forward towards 
the goal of making things right. Nevertheless, Volkswagen knows 
that we will be judged not by our words, but clearly by our 
actions over the coming weeks and months.
    These events are fundamentally contrary to Volkswagen's 
core principles of providing value to our customers, 
innovation, and responsibility to our communities and our 
environment. They do not reflect the company that I know and to 
which I have dedicated 25 years of my life. It is inconsistent 
that this company involved in this emissions issue is also a 
company that has 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 again for allowing me to testify today, and I 
look forward to your questions. Thank you.
    [The prepared statement of Mr. Horn follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Murphy. Thank you, Mr. Horn.
    I now recognize myself for 5 minutes of questioning.
    On September 3rd, 2015, VW admitted to CARB and EPA that it 
had installed defeat devices in certain model year 2009 and 
model year 2015 vehicles. To the best of your knowledge, did VW 
install this software for the express purpose of defeating 
emissions controls?
    Mr. Horn. To our understanding--and this is also part of 
the investigation--it was installed to this purpose, yes, for 
this purpose.
    Mr. Murphy. Now in your written testimony you noted that 
you were made aware of potential emissions compliances in the 
spring of 2014.
    Mr. Horn. Uh-hum.
    Mr. Murphy. You also noted discussions at the time about 
penalties for noncompliance and the EPA's ability to test for 
defeat devices. At that time were you aware or informed that 
these vehicles contained defeat devices?
    Mr. Horn. No.
    Mr. Murphy. When did you first learn, then, that VW 
vehicles contained a defeat device?
    Mr. Horn. Around the September 3rd meeting, a couple of 
days before.
    Mr. Murphy. 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?
    Mr. Horn. So, the University of West Virginia made the 
study. There was a Jetta and Passat in there and another off-
road vehicle. I don't want to name the brand now. And the 
results were communicated. In this context, I was told by our 
experts in the Auburn Hills office--and it was also, you know, 
just four months into this market--that, of course, you know, 
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, will check 
on the study and the study results.
    As you also mentioned, it was a small team. Results have 
been published with all the emissions, which went overboard, 
and that they will check this, point 1.
    Point 2 is they would also look with all the responsible 
departments, and there was a number of experts at the 
Department 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 normally 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.
    Mr. Murphy. So, let me go back. Mr. Horn, the new Chief 
Executive, Volkswagen, Mr. Mueller, has been quoted in media 
reports this morning saying that only a few people were 
involved with the deception. Now I have to say that I don't 
take much comfort in that, especially knowing that Volkswagen 
has been known for superb engineers and mechanics, who I wonder 
shouldn't they have picked up on this. But isn't it true that 
the technology was installed in the automobiles at least 
initially because the cars could not meet the new, more 
stringent emissions standards for diesel engines?
    Mr. Horn. Yes, to your last question, this appears to be 
this way, and to newspaper articles about possible quotes of 
Mr. Mueller, I don't want to quote this.
    As I said, also, the investigations are preliminary. One 
week our group revision did the investigation from September 
22nd to October 1st. And then, the entire investigations on 
this matter is turned over to an external agency, a law firm 
called Jones Day, an American company, which is now going 
through the systems, outside advice, outside counsel.
    Mr. Murphy. I think what we find amazing is that West 
Virginia University discovered this, and your army of brilliant 
engineers and talented mechanics didn't know something was 
amiss. And I am sure we will have more questions about that.
    But I want to ask you this: in terms of VW's status for 
remedying these defeat devices, who is responsible for 
developing and testing the solution?
    Mr. Horn. The responsibility for developing and testing the 
engine and drivetrain software lies within the Engine and 
Drivetrain Division in Germany, in Wolfsburg, for the two-
cylinder, for the four-cylinder TDI engines.
    Mr. Murphy. Now will this require a software patch or 
changes to the actual vehicle's architecture and hardware?
    Mr. Horn. Yes, thank you for this question. I think we have 
to do a different change now into the three groups of cars. 
You've mentioned that roughly 500,000 cars are affected. Out of 
those, round about 430,000 cars are the Gen 1 vehicles, which 
were the very early vehicles, started here in 2009. For those 
cars, we believe that a software-only solution will not be 
possible because, also, to be quite frank and logic, you know, 
if 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, and there are different strategies about an 
additional NOx catalytic converter as well as an SCR Urea Tank. 
But this is something which is hardware engineering, which is a 
little bit--it's 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, 
I feel there are 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, let's say, sensor. But whatever I 
explain to you now, anyway, this is being discussed in a timely 
manner now in the next couple of weeks with the California Air 
Resources Board and the CARB.
    For the Generation 3 vehicles, so the actual----
    Mr. Murphy. Can I ask, because I have gone way over time--
--
    Mr. Horn. Sure, sure.
    Mr. Murphy. I am sure other colleagues are going to be 
asking some more detailed questions that we will get today.
    Mr. Horn. OK.
    Mr. Murphy. But I now need to yield 5 minutes. I recognize 
Ms. DeGette for 5 minutes.
    Ms. DeGette. Thank you, Mr. Chairman.
    Now, Mr. Horn, your company acknowledged that it installed 
these defeat devices on a number of models dating back to 2009, 
correct?
    Mr. Horn. Sorry, I have a problem understanding with all 
this noise stuff.
    Ms. DeGette. Oh, Mr. Chairman, Mr. Chairman, can you please 
have quiet in the room, so Mr. Horn can understand me?
    Mr. Murphy. Yes. Thank you.
    The room will please be quiet, especially upfront. Thank 
you. So, you are not distracted. Thank you.
    Ms. DeGette. All right. I will ask that again. And if I can 
have the clock reset to 5 minutes?
    Mr. Horn, your company has acknowledged that it installed 
these defeat devices on a number of models back to 2009, yes or 
no?
    Mr. Horn. Yes.
    Ms. DeGette. And do you know how the various defeat devices 
installed in the cars actually work at this point?
    Mr. Horn. Personally, no, I'm not an engineer.
    Ms. DeGette. Does someone at VW know how these defeat 
devices work?
    Mr. Horn. I believe this is also within the investigations, 
and I believe that----
    Ms. DeGette. Can you please give us the information when 
you find out?
    Mr. Horn. We will. We will if we have it.
    Ms. DeGette. Thank you very much.
    Now you mentioned this West Virginia University study that 
was conducted in May of 2014 which found that there real NOx 
submissions on several Volkswagen vehicles exceeded EPA 
standards by as much as 35 times. Following publication of that 
study, VW represented to the California Air Resources Board, or 
CARB, and to the EPA that the increased emissions were due to 
technical issues and unexpected in-use conditions. Correct?
    Mr. Horn. I'm sorry, you guys cough here all the time, and 
I have trouble----
    Ms. DeGette. All right. I will ask the question again.
    Mr. Horn. Thank you.
    Ms. DeGette. After that study by West Virginia University, 
isn't it true that VW told the EPA and the California Board 
that the increased emissions were due to technical issues and 
unexpected----
    Mr. Horn. Yes.
    Ms. DeGette [continuing]. In-use conditions?
    Mr. Horn. Yes.
    Ms. DeGette. Yes.
    Mr. Horn. True.
    Ms. DeGette. And those representations at that time were, 
in fact, incorrect and false, weren't they, sir?
    Mr. Horn. Yes.
    Ms. DeGette. 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?
    Mr. Horn. To my knowledge at this point of time, no.
    Ms. DeGette. No one in the U.S. did?
    Mr. Horn. No.
    Ms. DeGette. OK. Now, in December 2014, VW proposed a 
recall of 500,000 vehicles to resolve the, quote, ``technical 
issues''. Is that correct?
    Mr. Horn. Uh-hum.
    Ms. DeGette. And, in fact, a number of those vehicles were 
recalled. Is that correct?
    Mr. Horn. Yes, most of them.
    Ms. DeGette. But, after they were recalled, the California 
regulator still said that that fix did not work, isn't that 
correct?
    Mr. Horn. That is correct.
    Ms. DeGette. 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 of 2014?
    Mr. Horn. To my best knowledge today, no.
    Ms. DeGette. Mr. Horn, when did you personally learn of the 
defeat device and under what circumstances?
    Mr. Horn. Around the meeting on September 3rd with CARB and 
EPA.
    Ms. DeGette. OK. Now you talked, when the chairman asked 
you about these cars--I am concerned about what we are going to 
do about the 500,000 cars we have on the road in the U.S. And 
the first thing is, as you just testified, about 430,000 of 
those cars cannot be fixed by a software-only solution. Is that 
correct?
    Mr. Horn. Yes.
    Ms. DeGette. And that is because of the way that the engine 
is designed in these vehicles. Correct?
    Mr. Horn. I would say not the engine is designed, but all 
the after-treatment systems.
    Ms. DeGette. Right. And I have got to say, I have got to 
acknowledge my wonderful dealer Fred Emich, who is here today. 
And he let me come and talk to his wonderful mechanics on 
Monday. They gave me this chart right here. I tried to take the 
card 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 on these 430,000 cars. And 
as I could clearly see, you can't 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 that they can pass 
the emissions test?
    Mr. Horn. So, from this distance, I can't see the chart, 
but I believe it is maybe something out of our service 
literature or customer literature.
    Ms. DeGette. It is the exhaust system for these cars.
    Mr. Horn. Yes, but----
    Ms. DeGette. What can be done to fix that?
    Mr. Horn. There's two scenarios next to the software 
adjustments and one scenario----
    Ms. DeGette. But these are for the cars that can't have, 
that the software adjustments will not work.
    Mr. Horn. We are talking now about Generation 1 cars, the 
430,000 cars.
    Ms. DeGette. That's right.
    Mr. Horn. The picture you have shown and the treatment, 
software alone doesn't work because, otherwise, they would have 
done it right in the first place.
    Ms. DeGette. Right. So, what are you going to do for those 
cars?
    Mr. Horn. Two technical scenarios. Either a Urea Tank, SCR 
Tank, to put, add glue in there, or a specific catalyzer for 
the NOx. Two technical scenarios.
    Ms. DeGette. OK, but those cars don't have the Urea Tank 
right now?
    Mr. Horn. No. That's why it has to----
    Ms. DeGette. So, this would be a major fix, correct?
    Mr. Horn. Yes, ma'am.
    Ms. DeGette. Now what is the timeframe VW has set for that 
fix?
    Mr. Horn. We are still working on the timeframe, and it's 
too early to say when this fix exactly is going to take place.
    Ms. DeGette. When are these dealers going to be allowed to 
sell these cars?
    Mr. Horn. The dealers, the issue with the dealers, as Fred 
Emich told you, is that we have not the model year '16 
certified and we have stopped sale on our own, on our own----
    Ms. DeGette. Right. When is that going to be fixed?
    Mr. Horn. The model year '15----
    Ms. DeGette. So you are going to be able to sell those 
cars?
    Mr. Horn. There are two scenarios. A scenario, we are now 
trying to get a conditional approval with the EPA until we have 
the final software fix beginning of next year.
    Ms. DeGette. The beginning of next year? And in the 
meantime, what are the dealers and the customers supposed to 
do, the ones who have these cars?
    Mr. Horn. Well, in the meantime, no customer can buy a car 
because it's not available for them. And with the dealers, we 
have very early started a program to work with them to also 
help them financially and to communicate with them----
    Ms. DeGette. OK, 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.
    Mr. Horn. The EPA has said, and they have repeated this 
also in their statement, that these cars are legal and safe to 
drive.
    Mr. Murphy. Thank you.
    Mr. Horn. Until now, there's no indication that they didn't 
pass any emissions test.
    Mr. Murphy. Thank you. The gentlelady's time has expired.
    Now we need to recognize the chairman of the full 
committee, Mr. Upton of Michigan, for 5 minutes.
    Mr. Upton. Thank you, Mr. Chairman.
    I want to go back to the specifics of the defeat device. 
So, I live in Michigan. Where I live we don't need to test our 
cars for emissions on an annual basis, as many States require. 
Certainly, in this region here in DC I know they do.
    So, 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 emissions 
sticker that is often required in the States that require such?
    Mr. Horn. So, I'm----
    Mr. Upton. I've been told a couple of things, but I just 
want to know if you can walk----
    Mr. Horn. I can't tell you----
    Mr. Upton [continuing]. Me through how that could change 
the emissions system. What happens?
    Mr. Horn. I can share my best knowledge, but I'm not an 
engineer, neither a software engineer.
    Mr. Upton. Well, I----
    Mr. Horn. But 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 or the software could detect whether 
it was on a dyno, in a testing laboratory environment, or 
whether it was on the street.
    And one example of this, as experts have explained to me, 
is that the software could detect whether the steering wheel 
made an angle. So, there might have been and there will be 
other parameters, like maybe speed and, then, change of speed 
and those things.
    Mr. Upton. Maybe the weight of the driver in the driver's 
seat?
    Mr. Horn. I don't think so, but maybe. I don't know.
    Mr. Upton. So, wouldn't it be easy to develop the software 
that would just remove that?
    Mr. Horn. Yes. This will be, this software will be ready--
--
    Mr. Upton. But, of course, when that happens, the car isn't 
going to meet the emissions test.
    Mr. Horn. Regarding the model year '16 and '15, which were 
the Generation 3 cars, which we are discussing right now with 
the agencies, the defeat device will be either switched off, 
and from January onwards will be completely taken out of the 
car. And those cars will pass the emissions test.
    Mr. Upton. So, how many vehicles will not pass the 
emissions test, or the ones that you have identified?
    Mr. Horn. Now, I mean, my question----
    Mr. Upton. So, you will be able to do that with the later 
versions, right?
    Mr. Horn. We have----
    Mr. Upton. But not the earlier versions of the vehicle? 
They won't 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. And that is your big goal.
    Mr. Horn. The burn standards, yes, you're right.
    Mr. Upton. And how many of those vehicles are there on the 
road?
    Mr. Horn. Well, we have a total of 500,000: 430,000 
Generation 1 vehicles, 95,000 Generation 2 vehicles, and then, 
it's around 70,000 Generation 1 vehicles. And so, you know, all 
of these cars are out of the legal compliance, clearly. But, as 
EPA has said, all these cars are legal and safe to drive for 
the owners. So, we are not selling the cars, but the owners can 
legally drive and safely drive their cars.
    Mr. Upton. So, your dealers across the country, they have 
their finance plans, where they have quite an inventory, I 
would guess, of cars that they are now unable to sell. They 
have paid in advance for those under the financing plan that 
dealers have, and they are not going to be able to sell them 
for a number of months, perhaps even as long as six months at a 
minimum, until the fixes can be done.
    What type of remedies are you offering the dealers in terms 
of financial incentives, knowing that they have paid for these 
cars and, frankly, lost a boatload, I would imagine?
    Mr. Horn. Yes, and this is also----
    Mr. Upton. That inventory has got to be a pretty big loss.
    Mr. Horn. This is also one of the things which troubles me 
personally very much because the last one, yes, we've worked 
very hard and we've brought profitability up and all of those 
things.
    But I'll tell you exactly. On Friday, the 18th, the Notice 
of Violation was communicated. We had a call with the National 
Dealer Counsel. Some of the folks are sitting behind me. On 
Monday, we issued our first financial relief aid. So, we put 
all the TDIs, used cars, CPO cars, and new cars on free 
flooring. We took all the bonus thresholds out for car sales. 
So, we paid maximum bonus for each car sold, and we took also 
out the customer satisfaction targets objectives and we paid 
maximum customer satisfaction bonus on those cars. And this is 
more than $1,000, $1,500 per car.
    Coming towards October now, we provided every dealer around 
the U.S. with a discretionary fund, with a discretionary fund 
which was explained to them through the District Managers, the 
Sales Operations Managers, and which was wired to the dealers 
on October 1st.
    I don't want to call out the number, but it is a 
significant amount of money in order for them to have 
flexibility. So, no accountability towards us; flexibility to 
solve the most urgent customer cases or to invest or to put the 
money where they think it would be fit.
    And now, when I come out of this congressional hearing, on 
Friday we look at the next programs in order how can we help 
the dealers with the cashflow of their cars, for the cash 
position. Because one thing is very, very clear--and I'm damned 
sincere about this--the dealer profitability of this country is 
my first objective. And I said this on January 1st and I 
continue to say this. So, this is one part.
    And also, on Friday we look very intensively into the 
customer remedies and what we need to do to the customers. And 
there will be the first scenarios on the table.
    Mr. Murphy. All right. Thank you. The gentleman's time has 
expired.
    I now recognize the ranking member of the full committee, 
Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
    Mr. Horn, your statements so far don't give me much 
confidence that we are ever going to see a fix for these 
vehicles that are impacted. You know, you say that you can't be 
fixed by a software-only solution. You don't have the necessary 
timetable as to when the fix is going to 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? I mean, how do we know 
that what you are proposing to do is actually going to work?
    Mr. Horn. Whatever I tell you here today is agreed and is 
coming from the Technical Engineering Department in Wolfsburg. 
And alongside our actions in Europe, we have to have our 
actions in the U.S. And the technical----
    Mr. Pallone. No, I understand, but is it fair to say that 
you really don't know whether you can fix these vehicles to 
achieve the emissions standards?
    Mr. Horn. We know that we can fix these vehicles to achieve 
emission standards.
    Mr. Pallone. All right. But, then, what happens with regard 
to other things like fuel economy, engine performance? You 
know, people bought these vehicles thinking that they were 
going to meet the emissions standards. They were going to have 
good fuel economy. They were going to have good engine 
performance. Can you guarantee that any fix you make to the 
vehicles doesn't affect fuel economy or engine performance or 
both?
    Mr. Horn. At this point of time, my understanding is, if we 
correct the nitrogen oxide emissions to the emissions 
standards, the customer will get the MPG on the Monroney label. 
That's my current understanding. Whether the full performance 
of the car--and this is something also our chairman, Matthias 
Mueller, or CEO, Matthias Mueller, said in Germany--maybe on 
top speed they might be, 1 or 2 miles per hour might be 
missing, but this is, of course, something which we will share 
with the agencies. But current understanding is that the 
customer will keep the Monroney label miles per gallon.
    Mr. Pallone. I mean, the concern I have is, you know, when 
you buy one of these cars, you are relying on not only the 
emissions standards, but the fuel economy is good and the 
performance is good. I think you get to the issue of damages 
here. In other words, if I am an owner and the fix doesn't 
achieve good performance, good fuel mileage, then I am going to 
expect to be compensated in some way if that is not the case.
    And I just remain concerned that any fix is going to 
substantially change the cars and that it is unfair to the 
consumers who bought the cars and relied on them because they 
expected them to perform a certain way. But you are telling me 
that the fix will guarantee good performance and will guarantee 
good fuel economy?
    Mr. Horn. I said, to my current understanding, in achieving 
the emissions standards, the Monroney label miles per gallon 
will be achieved. There might be a slight impact on the 
performance. And this is naturally not only the discussions 
with the agencies, but, of course, we will look into 
compensating our customers. And, of course, if there would be 
significant differences, this would be part of the discussion.
    Mr. Pallone. Well, let me get to another issue. What about 
the impact on clean air? I mean, we know that there's all kinds 
of health impacts, asthma, other respiratory illnesses that can 
seriously affect people, send them to the hospital that get 
sick because of NOx and these other problems. I mean, you 
obviously agree that NOx pollution can result in serious health 
and environmental effects. I would assume you would agree with 
that.
    Mr. Horn. I have also read the EPA statement, that in 
general, and not specifically to Volkswagen, they have 
indicated that there might be respiratory problems which could 
also lead--I mean, I am quoting yesterday, basically--to 
hospital visits.
    Mr. Pallone. Well, what are you going to do to rectify 
that? How do you plan to mitigate the harm caused by this 
excess pollution emitted into the air over the last 7 years? My 
understanding is that the NOx emissions from the affected 
vehicles are up to 40 times the allowable limit. So, what are 
you going to do with regard to this excess pollution and the 
impact it may have had?
    Mr. Horn. I think there's, first of all, many different 
studies. And so, I would like to go back to the EPA yesterday, 
of what they said. I think it will be part of the discussion.
    But I would also like to point out that, if you look at 100 
percent of nitrogen oxide emissions in the U.S., the car and 
truck industry is having 5 percent. Our group here in the U.S. 
has 4 percent of the 5 percent, which is .2 percent. And of 
this, 20 percent is TDI, which is .05. And now, we can multiply 
this, which is not belittling this and it's clearly 
unacceptable. But, within this context, clearly, the discussion 
will come up and needs to be addressed.
    Mr. Pallone. All right. Thank you.
    Thank you, Mr. Chairman.
    Mr. Murphy. I now recognize Ms. Blackburn for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Mr. Horn, you said profitability is your top priority when 
you were speaking of the dealers and----
    Mr. Horn. For the dealers, yes.
    Mrs. Blackburn. Yes. I would hope that safety, quality, 
integrity are top priorities, and profitability comes along 
there as a part of that picture.
    Let me ask you about this. Are you going to buy back the 
inventory that the dealers have?
    Mr. Horn. No, our plan is not to buy back----
    Mrs. Blackburn. No?
    Mr. Horn [continuing]. The inventory.
    Mrs. Blackburn. Not to buy back? OK.
    Mr. Horn. Our plan is to fix the cars.
    Mrs. Blackburn. OK. Let me move on with you. Have you 
identified the individual or group of individuals that are 
responsible for the defeat device?
    Mr. Horn. These investigations are ongoing.
    Mrs. Blackburn. You have known about this since the spring 
of 2014, a year and a half.
    Mr. Horn. We know about this since September 3rd, that the 
violation is there. And since this time and since the September 
18th Notice of Violation, the Board has acted and has asked 
Jones Day to investigate.
    Mrs. Blackburn. But you have known that there was some 
activity around this defeat device since the spring of 2014, 
correct?
    Mr. Horn. No, I did not know. As I have said----
    Mrs. Blackburn. OK. So, you did not know it in the spring--
--
    Mr. Horn. No.
    Mrs. Blackburn [continuing]. Of 2014?
    Mr. Horn. No, again.
    Mrs. Blackburn. So, you just learned about it September 
3rd, 2015?
    Mr. Horn. Around the September 3rd events, yes.
    Mrs. Blackburn. OK. All right. Let's go to your six-point 
remedy plan. You have talked some about point 3, which is that 
they are 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?
    Mr. Horn. Yes, correct.
    Mrs. Blackburn. Very good.
    All right. Then, let's go to point No. 1. You state that 
Volkswagen will examine its compliance processes and standards 
and adopt measures to make certain that something like this 
cannot happen again.
    Mr. Horn. Uh-hum.
    Mrs. Blackburn. So, why don't you give us a little bit of 
specificity on that and what, if any, steps are currently 
underway 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?
    Mr. Horn. So, as I am the CEO of Volkswagen Group of 
America, I can only report to you on what is managed by 
Volkswagen headquarters worldwide at this point of time. And as 
I've said, it's Jones Day. They manage all the investigations 
in terms of who did what, when, how, and why, and what do we 
need to do in order to rectify this for the future in terms of 
process adjustments and compliance adjustments.
    Mrs. Blackburn. So, then, you are saying that, as of now, 
you do not have a plan?
    Mr. Horn. As of now, we are still in the investigation 
phase.
    Mrs. Blackburn. OK. 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 have trusted in 
you, to make them whole? Also, the individuals that are 
employed by your facilities, when are they going to have some 
certainty as it relates to the jobs?
    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?
    Mr. Horn. You mentioned six points, and we started with the 
first point, compliance. I don't have a timeline for this yet.
    Mrs. Blackburn. OK.
    Mr. Horn. We are working instantaneously with the dealers 
and developing plans by the week as we go, as we go. And you 
can ask those folks behind me on whether this works or not.
    And for the customer, it depends on the technical remedies. 
So, again, this is Generation 3. January this year, January 
next year--sorry--we will start to give the software to the 
agencies. Generation 2, the middle of the year. Most probably, 
Generation 3, due to the technical complexity, will be a little 
bit later. So, there's different timings, and I apologize not 
for having a full-fledged plan of the Board by Volkswagen 
company right now here in my pocket.
    Mrs. Blackburn. So, you are certain it is going to be a 
multiyear plan?
    Mr. Horn. Excuse me?
    Mrs. Blackburn. You are certain the remedy will end up 
being a multiyear approach?
    Mr. Horn. Yes. If you look alone at 430,000 cars and the 
repairs might take 5 to 10 hours even in order to fix this, you 
know, technical fixes, and if you look at your recall history 
in this market, also with NHTSA, then these actions take, you 
know, 1 or 2 years minimum--minimum--when the fix is available 
for everybody, including parts and discussed with the agencies 
and agreed to.
    Mrs. Blackburn. OK. Let's see, my time has expired.
    I do have one other question about point 2 in your remedy 
plan. Mr. Chairman, I will submit that and yield back the time.
    Mr. Murphy. Thank you. Thank you very much.
    Now I recognize Ms. Castor for 5 minutes.
    Ms. Castor. Well, thank you, Mr. Chairman, for calling the 
hearing.
    Mr. Horn, according to reports, VW's defeat device is found 
in nearly 500,000 vehicles. Are you confident in that number? 
Could it be more? Could it be less?
    Mr. Horn. We are very confident in this number.
    Ms. Castor. Pardon me?
    Mr. Horn. We are very confident in this number.
    Ms. Castor. OK. Have you calculated the loss in value to 
customers, car owners?
    Mr. Horn. No, not yet. That's a matter of not only the 
investigations, but the calculations are ongoing. And on 
Friday, we will look at the first scenarios.
    Ms. Castor. OK. You have called your investigation 
preliminary, but you have known about this for a year and a 
half. The problems first came to light in May 2014, is that 
correct?
    Mr. Horn. No, this is not correct. As I explained, the 
study was published, and I had no reason to believe that there 
was a defeat device in those cars.
    Ms. Castor. Well, you found out, according to reports, in 
2014 that there was an issue, isn't that correct?
    Mr. Horn. An emissions issue, yes, that's correct.
    Ms. Castor. So, what did you do at that point in time?
    Mr. Horn. At that point of time, a plan was asked for from 
the engineers. And in July 2014, middle of the year, they 
presented a plan to me which was--and this is very important 
also--which was agreed and discussed with the Product Safety 
Committee worldwide. And these are those guys who manage all 
the recalls, all the service actions worldwide, including 
technical, procurement, legal, service, and those things.
    They came back with a plan, first of all, acknowledging 
that those results were correct and, secondly, with a clear 
timing on when those cars would get a software fix, which was 
also mentioned in one of the opening statements, as of the end 
of last year.
    Ms. Castor. Do you feel like you have been personally 
deceived now, after you found out subsequently that the defeat 
devices----
    Mr. Horn. Yes. Yes, and----
    Ms. Castor. Explain that.
    Mr. Horn. Look, I worked 25 years for this company. And 
beyond my personal objective of dealer profitability, 
integrity, quality, you know, and not cheating, was always for 
me a given for this company.
    Ms. Castor. And another----
    Mr. Horn. When I learned this, I am as touched and moved--
sorry--as my employees and as my----
    Ms. Castor. Another group feeling the effects of the VW 
defeat device defrauding are the VW dealers and their hard-
working employees all across this country, in addition to 
consumers. A recent Associated Press article noted that dealers 
are facing, quote, ``a lot of angry calls, emails, et cetera, 
from Volkswagen owners'' who feel betrayed because they 
believed they had bought a car that polluted less without 
sacrificing all the good gas mileage and the performance that 
comes with a diesel engine.
    Mr. Horn, how many VW dealerships are there in the U.S.?
    Mr. Horn. We have round about 650 VW dealers and 350 Audi 
dealers.
    Ms. Castor. And on average, how much of a VW's business do 
these diesel models----
    Mr. Horn. Twenty-five percent.
    Ms. Castor. And these dealers are now the frontline----
    Mr. Horn. Yes.
    Ms. Castor [continuing]. For unhappy customers who feel 
betrayed by the Volkswagen brand. And a media account yesterday 
quoted one dealer as saying, ``This is the biggest fraud I've 
ever seen.'' What do you have to say in response to that? What 
do you tell these business owners and their employees whose 
livelihoods depend on----
    Mr. Horn. I went immediately out with the Dealer Counsel on 
a call. I made a dealer video which was sent out, and the 
dealers even showed it to their children, and their families, 
and their employees, because they said that's the right thing 
on what we are approaching this.
    Ms. Castor. So, detail for us how VW is informing dealers 
about the defeat devices and the solutions to fix cars that 
feature these defeat devices.
    Mr. Horn. As soon as we have the information necessary 
already and have discussed this with EPA and CARB about the 
timing or alongside, the dealers will be naturally informed.
    Ms. Castor. They are not getting any information right now?
    Mr. Horn. No, of course, they get information.
    Ms. Castor. So, detail that for us.
    Mr. Horn. First of all, they get the information that we 
financially help them through this crisis. Secondly, the first 
thing is we took the bonus thresholds out. They have free 
flooring. They got the discretionary fund. We have increased 
the incentives by $2,000 for a loyal customer, for loyal 
Volkswagen customers, you know, a loyalty program.
    Ms. Castor. What does that mean?
    Mr. Horn. That means we get them started and don't let them 
dry out in the field.
    Ms. Castor. Is that a direct payment to customers or to 
dealers?
    Mr. Horn. 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 incentive that they can manage to bring 
loyal customers in, whether that is a TDI customer or a gas 
customer.
    Ms. Castor. So, is the intention there for the dealers, 
then, to contact customers who have purchased cars since the 
model year 2009?
    Mr. Horn. Yes, as one of the possibilities, sure, yes.
    Ms. Castor. Well, VW is not giving any direction to dealers 
and their employees on contacting customers at this point in 
time?
    Mr. Horn. No, of course, we are having--we have set up 
frequently asked questions. We are guiding the dealers with 
real-time the same information we have, and which goes to all 
call centers as well, because those, you know, I have visited 
the call center in Auburn Hills. Those people are also 
frontline. They need the same information, and as soon as we 
have it, the other people get it as well.
    Ms. Castor. All right. What has VW told dealers about how 
existing Volkswagen models will be affected, cars that dealers 
have already sold and cars that are now sitting on the lots?
    Mr. Horn. We've informed the dealers directly on September 
18 in a call to the National Dealer Counsel. We followed up 
with letters and videos to do this.
    Mr. Murphy. Thank you.
    Ms. Castor. OK, I am out of time.
    Mr. Murphy. The gentlelady's time has expired.
    I now recognize Mr. Barton for 5 minutes, from Texas.
    Mr. Barton. Thank you, Mr. Chairman. And thank you and Ms. 
DeGette 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. My former stepdaughter drives a 
Volkswagen Jetta. I don't think they are diesel. I think they 
are gasoline-powered, but they are both Volkswagens.
    I have always had the highest respect for Volkswagen. I 
think it is a fine company engineering-wise, you know, product-
wise. But I must tell you, sir, that it is extremely 
disappointing to look at the--I don't know the right word to 
use--immorality of the corporate decision to knowingly and 
willfully cheat on U.S. emissions standards.
    I mean, Volkswagen is one of the premiere name brands of 
auto manufacturing in the world, and it is a reputation that 
has been gained over the last 50 or 60 years. And to have a 
company of your stature knowingly and willfully make a decision 
at the highest levels of the company to put a software program 
in your products that are meant intentionally to deceive or to 
cheat on U.S. emission standards, to me, I wouldn't have 
believed it if it wasn't factually proven.
    So, my first question to you is, I am told that this was a 
decision made in Germany at the corporate level. Is that 
correct?
    Mr. Horn. Two answers to this. First of all, the 
investigations are ongoing, but this was not a corporate 
decision, from my point of view. To my best knowledge today, 
the corporation in no Board meeting or no Supervisory Board 
meeting has authorized this, but this was a couple of software 
engineers who put this in, for whatever reasons. And I would 
also like to find out, and I fully agree to your other 
statement.
    Mr. Barton. And this is an oversight hearing, so I assume 
that you are testifying under oath, is that correct?
    Mr. Horn. I am under oath. I understand this, sir.
    Mr. Barton. OK. So, what you are saying is that the senior, 
the president of Volkswagen International did not know about 
this when it happened?
    Mr. Horn. What I said was, to my understanding, this was 
not a corporate decision. This was something individuals did.
    Mr. Barton. OK. Now that is not what I was led to believe, 
but I take you at your word. So, I will ask the second 
question.
    When did senior management, i.e., the president of 
Volkswagen International, the executive vice present, whoever 
your senior day-to-day corporate officers are, when did they 
learn of this action?
    Mr. Horn. To my understanding, also around the September 
3rd notification of the agencies.
    Mr. Barton. But it occurred years ago.
    Mr. Horn. Yes, sir.
    Mr. Barton. Do you really believe, as good, as well-run as 
Volkswagen has always been reported to be, that senior-level 
corporate managers/administrators had no knowledge for years 
and years?
    Mr. Horn. I agree it's very hard to believe.
    Mr. Barton. Yes.
    Mr. Horn. And personally, I struggle as well, yes.
    Mr. Barton. That is an honest answer. I appreciate that.
    Well, I don't know what to do, but I do know that you can 
have 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 it is the law, it should be implemented, and 
corporate, especially international corporations should honor 
those laws, your company has not. I don't know what the penalty 
should be, but it should be more than just a slap on the wrist.
    I mean, I am going to listen to the rest of the testimony 
and the questions and the staff recommendations, but in every 
other case since I have been a Congressman, when we have had 
problems with manufacturers, automobile manufacturers, in every 
case it has been something happened that was really a mistake, 
an accident, that they just didn't foresee it. That is not the 
case here.
    Mr. Horn. Yes.
    Mr. Barton. There was a knowingly and willful decision to 
deceive in one of the most important markets in the world, and 
that, sir, is just wrong.
    And with that, I----
    Mr. Horn. We agree.
    Mr. Barton. Thank you, sir.
    Mr. Murphy. Thank you.
    I now recognize Mr. Kennedy for 5 minutes.
    Mr. Kennedy. 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 investigations ongoing. So, I 
appreciate that and I recognize that.
    I do want to go back to what a number of my colleagues has 
gone to with regard to the timeline here. My understanding, and 
from your testimony, was that in the spring, I think 
specifically May of 2014, was when Volkswagen became aware that 
there was some issue with regard to emissions, is that right?
    Mr. Horn. Yes.
    Mr. Kennedy. And then, it was from May to December that 
CARB 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?
    Mr. Horn. I can't answer this really. I mean, I know that 
the actions to remedy these findings were discussed with CARB 
and EPA. Whether they have undergone their own investigations 
between May 2014 and December 2014, I don't know. I know they 
did this afterwards, when we started to flesh the cars with the 
new software.
    Mr. Kennedy. So, oK. If I tell you that EPA and CARB 
continued an investigation after that preliminary report from 
May and they continued their investigations, then December 2nd, 
2014, VW shared test results with EPA and CARB and proposed a 
recalibration fix, is that accurate?
    Mr. Horn. Yes.
    Mr. Kennedy. And then, VW initiated a voluntary recall of 
approximately 500,000 vehicles to try to deal with that 
recalibration issue. In May, CARB commenced testing, May 6th, I 
believe, 2015, CARB commenced testing to discern whether the 
fix that VW had proposed adequately and accurately fixed the 
underlying issue.
    Mr. Horn. Uh-hum.
    Mr. Kennedy. May 6th through July 2015, CARB conducted 
laboratory and on-road testing to confirm the efficacy of the 
recall. What I am getting at here, sir, is July 8th CARB shared 
test results with VW and the EPA, prompting a series of 
technical meetings, from my understanding. And according to 
CARB, in the course of those meetings, VW disclosed that there 
were several issues, that Gen 1, Gen 2, and the 2015 model of 
the improved SCR vehicle known as Gen 3 had a second 
calibration intended to run 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 regard to the 
testing, was there not?
    Mr. Horn. This meeting you're referring to, I don't know. I 
can tell you that the first issue that got back to me and to my 
attention was on the 20th of July when my people of Product 
Marketing came to me and said we don't get the model year '16 
diesel certified.
    And then, I immediately wrote a letter or an email to Dr. 
Jakob Neusser, the EDP for Research and Engineering in 
Wolfsburg, and I escalated this. And the explanation was 
twofold: (A) There were new systems, and I don't know whether 
this is right; and (B) there is still information missing. So, 
also my teams in Herndon with the National Science Company did 
not have this information. And then, only in the weeks 
afterwards it started to unfold.
    Mr. Kennedy. And so, sir, if I am understanding kind of the 
broad aspects of your testimony correctly, this is something--
as you have said a number of 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 accurate?
    Mr. Horn. That's my understanding, yes.
    Mr. Kennedy. So, as of now, at least according to press 
reports as of this morning, there's four individuals that have 
been suspended. Is that right?
    Mr. Horn. I don't know. This is press reports.
    Mr. Kennedy. To your knowledge, has anybody been suspended 
to this point?
    Mr. Horn. I can't share names with you. There is no 
information----
    Mr. Kennedy. I am not asking for names. Has there been 
anybody that has been suspended at this point? Has anybody, as 
of now, after Volkswagen, for knowing at least of some 
inconsistencies with test reports for the past 18 months, has 
anybody been suspended or lost their job?
    Mr. Horn. To my understanding, there have been three people 
suspended, but I cannot share the names here, due to German 
law.
    Mr. Kennedy. And I am not asking for the names, sir.
    You mentioned the figures, roughly, that this would take 1 
to 2 years, 5 to 10 hours per car, in roughly 430,000 cars. Do 
you have any estimate at this point as to what the direct 
losses for Volkswagen would be because of this incident?
    Mr. Horn. I think the losses are depending (A) on the fines 
we will get and we will have to pay, and then, 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, I'm quite sure.
    Mr. Kennedy. And so, sir, I think the overall question that 
you are sensing from myself and colleagues is that I understand 
that this was a decision that you are indicating was made by 
people underneath you. It does get to the overall corporate 
integrity of the company. And so, what, if you can say, is 
going to be done to restore faith in the overall corporate 
structure of Volkswagen?
    Mr. Horn. First, a very important clarification. It was not 
done by people under me. I'm the CEO, president and 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 or steering.
    And the second, to get your answer hopefully in the right 
way, with the compliance investigations, we have to streamline 
our processes and this company has to bloody learn and use this 
opportunity in order to get their act together. And 600,000 
people worldwide have to be managed in a different way. This is 
very, very clear.
    Mr. Kennedy. Thank you, sir.
    Mr. Murphy. I recognize the vice chair of the full 
committee, Mr. McKinley, for 5 minutes.
    Mr. McKinley. Well, thank you, Mr. Chairman.
    Several things. First, you opted not to challenge the WVU 
decision, the research that was done. So, you have not 
challenged the research that was done. Everyone has recognized 
you did knowingly, then, violate, is that correct?
    Mr. Horn. I don't understand this question, sir. I'm sorry.
    Mr. McKinley. You opted not to challenge or appeal the 
findings from the WVU. So, does that mean----
    Mr. Horn. From?
    Mr. McKinley [continuing]. That you knowingly violated?
    Mr. Horn. No. No, sir.
    Mr. McKinley. You did challenge and appeal the WVU 
findings?
    Mr. Horn. I did not challenge because software actions, 
recalls, service complaints, in the millions for this company, 
is normally doing business. I was worldwide Service and Parts 
executive for Volkswagen worldwide. I've been to the Product 
Safety Committee. I know how the system is working with all the 
experts and that we got a seal of approval onto those actions, 
and I'm not the technical experts.
    Mr. McKinley. OK.
    Mr. Horn. It has enough people in the system----
    Mr. McKinley. Let me get to the crux more 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 of their chicken house out into the neighbor. 
And we have seen steel mills being fined $3, $5, $7 million 
daily until they clean up their discharge into a river. We have 
seen coal mines and other operations.
    So, there has to be, I think you can understand there ought 
to be consequences for this violation. So, I am curious, I 
assume you are accruing something on your financial sheets for 
what could be a fair, what could be an expected penalty for 
having violated the laws here of the United States. Can you 
share with us or will you share with us what you are accruing 
on your balance sheet for penalties, expected penalties?
    Mr. Horn. Yes, yes. For the time being, I mean, there an 
official information that the company has accrued directly 6.5 
billion euros in the first step in this year. Maybe this is 
enough; maybe this is not enough. I don't know. And the rest 
will have to be worked out with the specific experts, as we 
have hired enough experts, I can tell you.
    Mr. McKinley. Thank you.
    Now, when you import your vehicles in, you have to provide 
a Certificate of Conformity with the EPA standards. And from 
what I understand, the defeat device was not included in that 
Certificate of Conformity, is that correct?
    Mr. Horn. That's my understanding, yes, sir.
    Mr. McKinley. Can you share with us why someone tried to 
deceive the American Government, why that wasn't included in 
the application of conformity?
    Mr. Horn. Because those people who did the applications 
most probably did not know, did not know that it was in there.
    Mr. McKinley. Can you share with us who is responsible for 
this failure to include a description? Is this limited to one, 
two people?
    Mr. Horn. 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 
informations, all the results testing things, technical 
specifications, and then, they file the applications for 
conformity and all those.
    Mr. McKinley. Mr. Horn, thank you for testifying before us.
    Just one question is, we have all, many of us have been 
talking about this defeat device. For the American public to 
understand what this is, can you explain what this defeat 
device is and how it functions?
    Mr. Horn. Yes. To my understanding, the defeat device is 
not a device, but it's a software code in the engine and 
exhaust system management which detects, this software detects 
whether a car is on the dyno testing environment or whether the 
car is on the road being driven.
    And one example, for instance, is the steering wheel angle 
and how many times it has been changed. Because once a car is 
on the dyno, it is on the dyno. Nothing changes. And if the car 
is on the street, the steering wheel changes. And that since 
there's so many sensors in there, these are one of the examples 
people gave me on how this device, which is a software code 
again, worked, but hidden in millions of software codes. So, if 
you don't know this, it is very difficult to detect, from my 
limited technical understanding.
    Mr. McKinley. Thank you. I yield back my time.
    Mr. Murphy. Thank you. The gentleman yields back.
    I now recognize Ms. Schakowsky for 5 minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I have in my hand a letter from Volkswagen that was 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 
and 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 that is 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. I am not 
excited about contributing to or driving a car that has that 
kind of emissions.
    So, how much patience is my staff supposed to have? What is 
the timeline here? What is the best scenario and the worst 
scenario in terms of timeline for fixing this?
    Mr. Horn. For the Generation 3 cars, this is model years 
'16 and '15, the timeline is beginning of next year a complete 
fix. For the Generation 2 cars, it's still under development. 
This won't start, from my judgment, before the middle of next 
year. And for the Generation 1 cars, which is the biggest feat, 
I cannot give you a date right now, but within the next couple 
of weeks we will start discussing those scenarios with EPA and 
CARB, and alongside the development guys will have to do that--
--
    Ms. Schakowsky. So, these cars unfixed could be on the road 
for more than a year, let's say?
    Mr. Horn. Yes.
    Ms. Schakowsky. Or 2 years?
    Mr. Horn. More than a year, definitely.
    Ms. Schakowsky. I wanted to follow up on a question that 
Mr. Pallone 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 that is so, why didn't 
Volkswagen do that initially? Why wouldn't you make a car that 
would achieve those goals?
    Mr. Horn. I think it's a great question.
    Ms. Schakowsky. I mean, I can only assume that maybe 
cheating was cheaper?
    Mr. Horn. To my understanding, what I've learned, some 
people have made the wrong decisions in order to get away with 
something which will have to be found out.
    Ms. Schakowsky. 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?
    Mr. Horn. This is one of the areas we're looking into right 
now in terms of how to compensate our customers, yes.
    Ms. Schakowsky. Providing rebate for lost value of the car?
    Mr. Horn. Sure.
    Ms. Schakowsky. 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?
    Mr. Horn. 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.
    Ms. Schakowsky. And so, even you know that there is up to 
40 times more pollution, if I went to my dealer, who might 
because they are in a fix right now say, ``OK, well, we will 
give you a loaner,'' the company would not do anything to make 
ultimately your customer happy?
    Mr. Horn. So, there's a general policy, and this is exactly 
the reason why we gave the dealers the discretionary funds 
which they could use at their discretion in order to help 
customers, very significant cases. And 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 specific 
customer's situation, they can do it with this money. No 
questions asked, yes.
    Ms. Schakowsky. But there is no policy that dealers could 
say that loaners would be available? I realize 500,000 loaners 
would be probably a hard thing to do.
    Mr. Horn. Right.
    Ms. Schakowsky. But you see how that would be a desirable 
remedy for many people?
    Mr. Horn. I understand your point, yes.
    Ms. Schakowsky. Yes. Well, I just 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 just really not sufficient.
    I heard people on the radio who were repeatedly saying, ``I 
just want you to take back my car and give me the amount of 
money that I paid for it. I don't want that car. I don't want a 
fix because it may not provide exactly what I thought I was 
buying in the first place.'' I would hope that your company 
would consider that as a primary remedy.
    And I yield back.
    Mr. McKinley (presiding). Thank you.
    The Chair recognizes Dr. Burgess for his 5 minutes of 
questioning.
    Mr. Burgess. Thank you, Mr. Chairman.
    And let me just stress that I am as far ideologically from 
Jan Schakowsky as possible, and I am not here to provide you 
advice, but I think she is giving you good advice. I have been 
on this subcommittee for over 10 years.
    I have been through Toyota. I have been through General 
Motors. And 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 dismissive and minimizing the 
problem that is faced by consumers, dealers, suppliers is not 
in your best interest and it will hurt you. So, I would be 
aggressively compliant and aggressively trying to make it right 
for your customers, dealers, and suppliers because in the grand 
scheme of things I actually believe that will be less costly in 
terms of dollars, in terms of reputation, and just in terms of 
the endurance of the brand in the United States, which you have 
already heard from members of this committee is significant. 
Our histories with your company all are significant. They go 
back a significant way.
    Now that I have gotten that off my chest, let me just ask 
you once again--you have been asked before--but are these 
vehicles safe to drive?
    Mr. Horn. Yes. Yes, the EPA has said these vehicles are 
safe to drive.
    Mr. Burgess. So, this is unlike some of the other recalls 
that we have talked about in this subcommittee, problems with 
airbags, problems with electronic throttle controls. These do 
not pose an immediate jeopardy to the life of the driver or the 
passengers?
    Mr. Horn. I trust the judgment of the EPA, yes.
    Mr. Burgess. Now, trusting judgment, that is what we are 
doing here today, is 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?
    Mr. Horn. Yes, sir.
    Mr. Burgess. But do you travel back and forth to Germany 
from time to time?
    Mr. Horn. Too often right now not much.
    Mr. Burgess. Yes, well, have you been in the month of 
September?
    Mr. Horn. Yes, usually once a month, yes.
    Mr. Burgess. 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, what's 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 that was added to an 
automobile?
    Mr. Horn. Personally, I have taken out Mr. Mueller of 
conference rooms, Dr. Diess out of conference rooms, and 
personally talking intensively to the engineers on how we make 
this right. And to other questions, you know, ``How is this 
possible?'', ``Who has done what?'', they said, ``We didn't 
know ourselves.''
    Mr. Burgess. Yes, but do you understand how that just 
defies credulity? I mean, here is a software program----
    Mr. Horn. Yes.
    Mr. Burgess [continuing]. That wasn't just written, I mean, 
I am suggesting here it was written by one person in their 
basement in the dark of night. I mean, this had to be a team of 
people who were working on this.
    You have got these rascals over here at the EPA in the 
United States, and they are just hard to deal with. So, we want 
to do something that we will be able to sell our cars, and we 
will just trick them. We will just trick them. And then, 
somehow you are going to integrate that into the supply chain 
of a multinational corporation, and nobody knows a darn thing 
about it? I mean, that is what you are asking us to believe. 
And you understand why, and you have heard it from a number of 
members, the incredulity that that could, in fact, happen in a 
large multinational corporation.
    Mr. Horn. I fully agree, sir.
    Mr. Burgess. Have you asked that question to the people----
    Mr. Horn. Yes.
    Mr. Burgess [continuing]. Who are superior to you at 
Volkswagen in Germany?
    Mr. Horn. Who was superior to me, the guy is not on board 
any longer. He is called Christian Klingler. He resigned due to 
other reasons.
    Mr. Burgess. Well, I almost just don't know what to say. 
Apparently, in the public domain in the early or 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 that is 
used.
    Mr. Horn. I have read this in the newspapers, yes.
    Mr. Burgess. OK. So, it is in the newspapers. Have you, 
yourself, looked at why did they look at this and, then, stop 
those negotiations for those leases? What changed? Did we 
develop some technology at Volkswagen? Did we develop a defeat 
device at Volkswagen? I mean, these are some of the questions 
that are just going have to be answered.
    Mr. Chairman, let me just say that I recognize and I 
appreciate Mr. Horn being here. I think that we are doing this 
hearing prior to the time that your document production 
deadline expired. So, we recognize that you are here 
voluntarily and it is your sincere effort to comply with the 
wishes of the committee.
    But let me just say, all of us represent dealers, 
consumers, suppliers, and their lives and livelihoods are 
extremely important to us. And that is what we have got to keep 
first and foremost.
    I yield back, Mr. Chairman.
    Mr. McKinley. Thank you.
    And the Chair recognizes the gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    And for our witness, we have other subcommittees going on. 
So, you will see members come in and out during the day.
    When I first heard about it, I was amazed that a company 
that is as great as Volkswagen could let this happen, and even 
to the executives maybe who didn't know, because the image of 
the company, not only in our country, but in Europe and around 
the world, is so great.
    Our committee wants to get some answers, and I would like 
to understand more about Volkswagen's own investigations in 
your efforts to find the cause of the debacle. News reports 
discuss several internal and external investigations initiated 
by Volkswagen. Mr. Horn, please explain Volkswagen's own 
investigations into this incident and how they are different 
from each other.
    Mr. Horn. The investigations started--I talked yesterday to 
our head of Group Revision--on September 22nd, this year, went 
on with our own Group Revision Department, Group Compliance 
Audit Department until September 29th, for one week. And then, 
all the documents, all the preliminary documents were turned 
over to the American law firm Jones Day, who is investigating 
this on behalf of our Supervisory Board.
    Mr. Green. OK. News reports have discussed several internal 
and external investigations. So, that was the only one you had, 
that was the auditors from September the 22nd to the 29th? Are 
there any other investigations Volkswagen is conducting?
    Mr. Horn. To my understanding, after the Notice of 
Violation, and from September 18th, from CARB and EPA, these 
investigations have started right away. And this is what I have 
told you, to my best knowledge. I don't know of any other 
investigations.
    Mr. Green. Do you know if the actions are in the United 
States or Germany or in both or everywhere where Volkswagen has 
sold these vehicles?
    Mr. Horn. Worldwide.
    Mr. Green. OK. Would you commit to sharing these 
investigations with the committee, the results of these 
investigations?
    Mr. Horn. I commit to get as much information as possible 
to this committee, yes.
    Mr. Green. OK. Thank you.
    Last week one news outlet reported that, quote, ``The 
Steering Committee of the carmaker's Supervisory Board met last 
Wednesday to discuss the preliminary findings of the probe into 
the scam.'' And that is a quote. What were these preliminary 
findings that were revealed last Wednesday?
    Mr. Horn. Sorry, I'm still a little bit confused by those 
folks here down there clicking all the time. Could you please 
repeat your question, please?
    Mr. Green. OK. There is a quote, ``The Steering Committee 
of the carmaker's Supervisory Board met last Wednesday to 
discuss preliminary findings of an internal probe into the 
scam.'' What were these preliminary findings that were released 
last Wednesday?
    Mr. Horn. Our own Supervisory Board of Volkswagen AG. I 
don't have access to these preliminary findings.
    Mr. Green. Can you get a copy of it and share it with our 
committee?
    Mr. Horn. I can definitely try, sir.
    Mr. Green. Pardon?
    Mr. Horn. I can try, sir.
    Mr. Green. OK. You are the CEO.
    Mr. Horn. I am the CEO of this company, and then, there's 
the Supervisory Board and there's a group of people who are 
quite above me in Germany, and the Supervisory Board has to 
make this decision.
    And I think, you know, with the commitment that our company 
has, there is a very good chance that the company will provide 
at one point of time the necessary documents to provide more 
clarity into these facts here and to this issue.
    Mr. Green. Again, like my colleague, 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 a September 30th news report, Volkswagen's 
Supervisory Board member Olaf Lies said, quote, ``These people 
who allowed to this happen or who made the decision and saw 
this offer, they're acting criminally. They must take personal 
responsibility.'' Mr. Horn, do you agree with that?
    Mr. Horn. Yes, sir.
    Mr. Green. OK. Do I have your commitment to full 
cooperation in finding and addressing the roots of the 
deception?
    Mr. Horn. Sure. Yes, sir.
    Mr. Green. And again, our committee is ongoing, our 
investigation. And I appreciate your being here.
    Mr. Chairman, I will yield back my time.
    Mr. McKinley. Thank you. Thank you.
    For the rest of the members with questions, I know we have 
got a break here in 20 minutes, but we have got 7 people that 
want to speak. So, we are going to be very short on the 
timeframe with this.
    But the Chair recognizes Mr. Griffith for a short list of 
questions.
    Mr. Griffith. Thank you. I appreciate it.
    As you have heard from others who have owned cars and 
learned to drive, I am one of those as well. My mother was able 
to afford her first new car, which was a Volkswagen Squareback. 
And that is what I learned to drive on. It was a manual. I have 
inherited my grandmother's 1972 Super Beetle, which I still 
have.
    In the eighties I drove a Rabbit. In the nineties, I bought 
a gas-powered Jetta. When it got close to 200,000 miles, my 
mother convinced me that even Volkswagens couldn't go on 
forever. She might have been wrong. I sold that car and bought 
a 2003 gas-powered Passat, which I drove until this summer and 
got 376,225 miles. And the people who bought it from me are 
going to tell me when it crosses 400,000. They think that there 
won't be any problem in doing that.
    As a backup to my 2003 Passat that was going and going and 
going like the Energizer rabbit or bunny, I bought a 2012 
Volkswagen diesel. So, everybody else is talking about what are 
consumers thinking. You are looking at him. I am your consumer. 
I am your Volkswagen driver who has always trusted your 
company, and I am very disappointed.
    So, what are we going to do? First, you have indicated--and 
there could be some differences in understanding in language--
you have indicated that you have notified the customer. I have 
checked with the previous owner. I bought the car from a 
friend. They have not received any notice that this 2012 diesel 
Passat is affected. When you go to the Web site, it says that 
you all received notice from the EPA that some of your two-
liter, four-cylinder TDI vehicles don't comply, and among the 
included vehicles, of course, is the 2012.
    Because I am not skilled like Chairman Murphy, I am not 
skilled and I couldn't take a car apart. I had a hard enough 
time figuring out how to get the top off, the plastic lid off 
of 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 here's one, and the original articles referenced 
the '14s and '15s, but didn't say anything about the '12s and 
the '13s, and then, you see a Volkswagen document that says 
discrepancies relate to vehicles with Type EA 189 engine, and I 
am looking in my manual and I am looking at things on the 
engine block, and it doesn't say anything about an EA 189 
engine.
    Now the team on the committee here and, then, my staff have 
figured out I am affected. We know that. But this was done at 
great trouble. I have received no letter. I can't tell for 
sure.
    And I will tell you what was interesting was we found that 
there was actually a site in the UK--and I know you are just 
America and I am just talking about America--where you can 
actually plug in your VIN number and it will tell you if you 
are affected. I would encourage you to consider that because, 
while you may think you have notified everybody, not everybody 
is capable of taking apart the engine and figuring out if they 
are an EA 189.
    And then, the other big question is, am I Generation 1 or 
Generation 2? They tell me I am Generation 2, which I found 
surprising based on the numbers that you have testified here 
today. Can you confirm that I am a Generation 2?
    Mr. Horn. If you have 2012 Passat, I would think so now, 
right.
    Mr. Griffith. OK.
    Mr. Horn. Yes.
    Mr. Griffith. And so, this is something else that you might 
want to put into your--it is a pretty simple Web site that 
takes the VIN numbers that are affected and says you are 
Generation 1, you are Generation 2. Because it sounds like the 
fix, as I am listening today, the fix to the Generation 2 is 
more simple than the fix to the Generation 1. Am I correct in 
hearing that today? It is a simpler fix for Generation 2 than 
for 1?
    Mr. Horn. Yes.
    Mr. Griffith. And then, I would have to echo what 
Representative Schakowsky and Dr. Burgess had to say. You know, 
when you buy a vehicle, even if you bought it used, and you are 
looking in the manual and it says, ``Under Federal Emissions 
Control System Defect Warranty, was designed, built, and 
equipped so as to conform at the time of sale with all 
applicable regulations of the United States Environmental 
Protection Agency (EPA), and is free from defects in 
material,'' et cetera, I believe that I was sold something that 
was different than what it was purported to be.
    And my friend didn't do the defrauding. It was the 
Volkswagen company. I think you are much better off to come up 
with a program that buys these cars back because, you know, I 
understand it wasn't your folks in Chattanooga that made this 
mistake, it was the folks in Germany. But you have got to 
restore trust, and one of the ways to do that is to stand 
behind your vehicle.
    One of the reasons that I have liked the company is that on 
my 1990s version something was wrong with the paint. No 
questions asked. When I took it into First Team Auto Mall in 
Roanoke, they said, ``Not a problem. We'll take care of it.'' 
And it was done. Never had another problem.
    This is a much bigger problem, but Volkswagen needs to 
stand up and say, ``OK, we understand. We will buy your car 
back at what the fair market value of that vehicle was prior to 
this notice coming out.''
    With that, I see my time is up and I yield back.
    But thank you for being here.
    Mr. McKinley. Again, thank you again. We have now 12 
minutes. So, I am asking those again, please, to keep their 
questions short.
    The Chair recognizes Mr. Yarmuth from Kentucky.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    Thank you for appearing, Mr. Horn.
    I suspect that I should be feeling a sense of schadenfreude 
here today because Ford Escapes and Lincoln MKCs are made in my 
district, and presumably, we will be selling some more of those 
while you are out of the marketplace. But I am not really 
taking any joy in any of this.
    I just have a couple of quick questions. The article I read 
said that there were about 11 million vehicles worldwide 
affected by this.
    Mr. Horn. Yes.
    Mr. Yarmuth. So, they contain the defeat device. I guess 
there is no added cost to put it in since it is just a line of 
computer code. Would that be right?
    Mr. Horn. It seems very logic, sir, yes.
    Mr. Yarmuth. Yes. So, 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? I mean, 
if the United States we are talking about a half a million 
cars, roughly, out of 11 million, what are Germany's emission 
standards, for stance? Are they stricter than the United 
States?
    Mr. Horn. I mean, there's many countries affected. All the 
countries in Europe are affected. The emission standards for 
diesel cars in Europe are different to the U.S. You have 
currently the E05 and going into E06 here. You have been 5.
    And there's two differences. First of all, nitrogen oxides 
are much more stringent here. It's 5 grams, I think, per mile, 
or whatever. And in Europe it is now 30 to 40. So, this is 
quite--it is higher. It is higher in Europe, but in Europe what 
is stricter is the diesel part of the particle filter 
emissions. There are these little diesel particle filters 
coming out. On that, the European laws are much stricter than 
the U.S.
    Mr. Yarmuth. My question is, would this defeat device that 
is 11 million vehicles have helped deceive the European 
countries' standards as well?
    Mr. Horn. I can only give you my understanding at this 
point of time. But, as you know, 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 that 
the defeat device is in those cars as well, but to what degree 
it is really affecting the emission laws, I don't know.
    Mr. Yarmuth. OK. I appreciate that answer.
    And I just want to say before closing that it is very 
refreshing to hear my colleagues from the other side defend the 
Clean Air Act and talk about emissions. I appreciate that. It 
is a rare occurrence.
    I yield back.
    Mr. Murphy (presiding). Mr. Collins is recognized for 5 
minutes.
    Mr. Collins. Thank you, Mr. Chairman.
    Since I am always, and again this time, one of the last to 
question you, I guess what I have picked up here, and I hope 
you can relay back to your Board, the folks running Volkswagen 
back in Germany, is that the response so far is inadequate.
    I would tell you from my perspective it is a sign of 
arrogance. It is a sign of not admitting yet the severity of 
your problem.
    I will tell you I am an engineer, and I have a way of 
thinking. And I cannot accept VW's portrayal of this as 
something by a couple of rogue software engineers.
    I would begin by saying, isn't intellectual property and 
patented work a very important part of what makes VW, VW? You 
are constantly looking for breakthrough technology that you can 
patent? That is a big part of your company, isn't it? You pride 
yourself on that engineering.
    So, you are having us believe--and I think this is the way 
an engineer's 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 NOx emissions were not even 
close. Would that be true?
    Mr. Horn. What is stumped?
    Mr. Collins. Stumped, confused. They couldn't get through 
it. It was an insurmountable roadblock. They couldn't give 
performance and emission control at the same time. They were 40 
times over the NOx emissions.
    Mr. Horn. It seems to be logic, what you are saying----
    Mr. Collins. Right.
    Mr. Horn [continuing]. But I don't know.
    Mr. Collins. So, then, if I am working in VW engineering 
and I am always looking for intellectual property that I can 
patent and give me a competitive advantage--and I know this is 
a problem, and I have to tell you this problem was going way up 
the chain. ``We can't do it. The NOx standards in the U.S. are 
not what they need to be. We can't do it.''
    ``Well, go work harder. Go find a solution.''
    People are coming back. ``We still can't find a solution.'' 
The Engineering Manager, ``We can't find a solution.''
    And then, all of a sudden, two software engineers, like 
they found pixie dust, come in and say, ``We found a solution. 
We've got it. We fixed it.''
    Now you are telling me these two engineers snuck that 
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 that is going to give us an 
advantage. We can meet the NOx standards and the performance 
standards, and we had a breakthrough. We went from 40 times the 
emissions to we met the emissions''?
    And VW is trying to get the United States of America 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 don't believe that for a second--or they are complicit at 
the highest levels in a massive coverup that continues today.
    Because just the very 5 minutes that I have been here, and 
as an engineer, and I am not a Ph.D., my mind immediately 
jumped to, with this being true, why didn't we look for 
patents? Why didn't we ask the questions what the pixie dust 
was? They have fixed this thing miraculously. This didn't 
happen in one day. This didn't happen in one month. Your 
engineers were looking at this, I can tell you, for many 
months. They were stumped. They couldn't come up with it.
    And then, all of a sudden, the solution is there, and VW is 
trying to tell us in the United States of America, in this 
Congress, that it was a couple of rogue engineers. Well, if 
that is true, then 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 I categorically reject everything that 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.
    And what I would like to conclude with, sir--again, I am 
also a financial guy, I am an entrepreneur--I would suggest 
that you be honest to your shareholders. Six point five billion 
euros is off by an order of magnitude. Five hundred thousand 
vehicles at $40,000 apiece, if you were to buy those back--and 
I would suggest you start doing that tomorrow--that is 20 
billion there. I would suggest you are off by an order of 
magnitude. And if you had told us today you had set aside $68 
billion, I would say you are probably in the ballpark. Six 
point eight, not even close.
    With that, Mr. Chairman, I yield back.
    Mr. Murphy. The gentleman yields back.
    I now recognize Mr. Welch for 5 minutes.
    Mr. Welch. Thank you very much.
    Sir, thank you for coming in. But I just want to express to 
you some of the things that I have been hearing from 
Vermonters.
    First of all, we have got VW customers, we have got VW 
dealers in red States and in blue States, and they are mad as 
hell. Some of the questions that came to me from Vermonters, 
and I want to submit this to the record and ask you, VW, to 
answer these questions from Vermonters.
    [The information appears at the conclusion of the hearing.]
    But let me just give a reflection of what these say.
    Number 1, ``What will''--you, VW--``be reading [when you 
are] in jail?''
    Number 2, ``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.
    One last question, ``How do you sleep at night? ... How 
[do] you call yourself a member of the human race when you 
knowingly ... poison the planet?''
    And then, I talked to some of our VW dealers. They care 
about their customers, and I know you individually do as well. 
And one of the dealers said this is on the scale of Enron and 
Bernie Madoff. That is how deceitful and unnecessary and 
willful it was.
    They will stand by their employees, our VW dealers, but 
this is going to be an expense to them because they are not 
selling cars that are bringing in profits. So, they are going 
to have to pay out of their own pocket, and they will do that 
because they are loyal to their employees.
    But 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. In my view, that is wrong. The wrongdoer, 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?
    Mr. Horn. If you want a clear answer under oath, I would 
have to really understand these tax loopholes, and I don't 
understand them. But I----
    Mr. Welch. 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.
    Mr. Horn. 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.
    Mr. Welch. Thank you.
    Another question, taking up where Mr. Collins was, I know 
you individually are appalled at what happened at VW, and you 
have asked your question, ``How did it happen?'' Someone 
somewhere made a decision to make it happen.
    Mr. Horn. Uh-hum.
    Mr. Welch. Someone somewhere implemented that decision. You 
have asked yourself how that happened, correct?
    Mr. Horn. Yes, sir.
    Mr. Welch. And your answer to yourself is what?
    Mr. Horn. My answer to myself is that I do everything--and 
I don't 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.
    Mr. Welch. I appreciate that, and I know that is true. You 
individually have a very good reputation, sir.
    Mr. Horn. Thank you.
    Mr. Welch. But I asked you another question. You know the 
company. You have asked yourself who and how. And in your own 
mind, I am asking you to share with us your own view about who 
and what, that it could happen in the corporate structure of 
VW.
    Mr. Horn. I think this is a speculation if I would start 
now. But, you know, I'm reading newspapers, as well, and 
there's been lots of articles around there. And from my 
personal feeling, this was pressure in the system to get 
resolutions and, also, in conjunction with cost pressure as 
well. This was discussed already here in one of the other 
instances.
    And I think it is dead wrong if you put corporate profits 
before people, and I think we have to get to the point that we 
put people first and not the pressure and corporate profits.
    Mr. Murphy. Thank you.
    Mr. Welch. What people in what department--my time is up?
    Mr. Murphy. Yes, your time is up.
    Mr. Welch. I yield back.
    Mr. Murphy. Thank you.
    I now recognize the gentleman from Texas, Mr. Flores, for 5 
minutes.
    Mr. Flores. Thank you, Mr. Chairman.
    Mr. Horn, thank you for joining us today in an obviously 
tough situation for your company.
    VW's 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 in the record on some dates and the who, 
what, where, when, as we have talked about before.
    In May of 2014, independent researchers published a report 
that first identified higher-than-expected on-road emissions in 
VW vehicles, which prompted the investigations by CARB and the 
EPA.
    So, question No. 1 is, when did VW first become aware of 
this research?
    Mr. Horn. The end of April when it was published. To my 
knowledge, it was published the end of April. Mid-May I got 
information about this.
    Mr. Flores. OK. What steps did VW take to evaluate the 
conclusions of the research at that time?
    Mr. Horn. First of all, to acknowledge that emission 
violations or higher emissions are not legal. Secondly, the 
engineering departments were supposed to recheck those testing 
results on our own equipment in order to validate this. And 
then, thirdly, to correct this with respect to software actions 
which have been implemented in the end of last year.
    Mr. Flores. OK. Now where was this done? Was this done 
Volkswagen Germany or Volkswagen U.S.? And who did that? Who 
was responsible for that?
    Mr. Horn. The software applications management for the 
engines and, also, for the exhaust systems are being done in 
Germany at the Engine and Drivetrain Department within the 
Research and Development Division.
    Mr. Flores. OK. The EPA and CARB both described a series of 
presentations or discussions with VW in the wake of the 
research in May of 2014. Who for VW was interacting with EPA 
and CARB? Were those individuals part of VW America or VW AG or 
both?
    Mr. Horn. That's something I would have to check, and maybe 
this is also in the records provided to you next week.
    Mr. Flores. OK. Great.
    What did VW America understand about the cause of the 
higher on-road emissions between May of 2014 and the voluntary 
recall in December 2014? In other words, what did you and your 
team at VW America know what was going on? What had VW Germany 
told you?
    Mr. Horn. That they have, to my understanding, validated 
those test results and developing software fixes in order to 
get this back in line, and three different tech talk versions 
which I didn't understand, to be also very honest, in order to 
bring this in the car.
    But, also, as I said, all these things are vetted through 
this Product Safety Committee which is worldwide responsible 
for this and which is also looking at the track, for instance. 
And in this context, I trusted those guys and those processes, 
that everything was according to the book 100 percent.
    Mr. Flores. OK. So, at that time, nobody in VW America knew 
that there was cheating going on in the software design?
    Mr. Horn. To my understanding, no.
    Mr. Flores. OK. Then, in December of 2014, VW conducted a 
voluntary recall that, at least in part, sought to address the 
higher on-road emissions in the model year 2009 through model 
year 2014 vehicles that were subject to the allegations. Would 
you explain what you understand this recall was intended to do?
    Mr. Horn. To correct the studies of the University, I think 
the results of the study of the University of West Virginia, 
our retesting to bring the cars, all the cars, back into 
compliance.
    Mr. Flores. OK. But that fix to the emissions problems that 
was implemented as part of that recall didn't resolve the issue 
of higher on-road emissions. So, the question is, who was 
responsible for developing that technical solution that was 
implemented in December of 2014?
    Mr. Horn. The same Engine and Drivetrain Division within 
the Engineering and Development Department or Division in 
Germany.
    Mr. Flores. The folks in Germany? OK.
    And so, what role did VW of America have in developing or 
validating that solution?
    Mr. Horn. We just have this office in Auburn Hills who do 
the applications. There's also a testing facility in Oxnard in 
California who also had those folks in testing, but, to my 
understanding, dyno testing, as far as the legal situation was 
concerned.
    Mr. Flores. OK. So, just to be clear, VW America did not 
develop the solution or played no part in development of the 
solution?
    Mr. Horn. No.
    Mr. Flores. OK. It may have helped validate the solution?
    Mr. Horn. I don't think so.
    Mr. Flores. OK. You don't think so? OK.
    And at that time, did you or anyone in VW of America have 
any knowledge of the alleged defeat device?
    Mr. Horn. At which point of time?
    Mr. Flores. At the time, December of 2014----
    Mr. Horn. No.
    Mr. Flores [continuing]. When you were beginning to roll 
out the recall solution, did you have any knowledge of the----
    Mr. Horn. No.
    Mr. Flores. Anybody in VW America, to the best of your 
knowledge?
    Mr. Horn. To my understanding, not, because, otherwise, I 
would have hoped that they would inform me about this.
    Mr. Flores. Thank you. I yield back.
    Mr. Murphy. Thank you.
    I now recognize Ms. Clarke of New York for 5 minutes.
    Ms. Clarke. Thank you, Mr. Chairman.
    And I would like to thank you, Mr. Horn, for taking the 
time and giving us as much background and as much knowledge of 
what has taken place, to the best of your ability.
    I have heard a couple of my colleagues on the other side of 
the aisle refer to what has occurred as cheating, but I would 
like to say to you that I believe it was an intentional 
deception. And I think we need to say it as it is. This wasn't 
a game. This was an intentional deception to bring something on 
the market that did not meet standards.
    I want to go back to something my colleague just raised 
about your testing center at Oxnard. I understand that, for the 
better part of the past year, VW was interacting with CARB 
about discrepancies related to the high emissions that were 
discovered in 2014 involving your vehicles. What is the purpose 
of the Oxnard facility? And is it, as the article suggests, 
developed to help Volkswagen meet emission standards?
    Mr. Horn. To my understanding, yes, and it's directly 
connected to the Research and Development Department in Germany 
to help them to get the cars into legal compliance and to the 
U.S. standards.
    Ms. Clarke. How many employees are there?
    Mr. Horn. Oh, I would have to guess this number.
    Ms. Clarke. OK. If you could just provide us with that?
    Mr. Horn. Just everything----
    Ms. Clarke. What was the role of the Oxnard facility in 
understanding the test results presented by CARB showing 
unexpectedly high on-road emissions? What was its role once it 
had that information?
    Mr. Horn. At this point of time, I can't answer this. I 
don't have the understanding. I only know that our Department 
in Auburn Hills was interfacing with CARB and EPA for the 
compliance, for the applications and everything.
    Ms. Clarke. So, as you have mentioned Auburn Hills, what is 
the role of that office?
    Mr. Horn. Excuse me?
    Ms. Clarke. What is the role of the Auburn Hills office?
    Mr. Horn. And to do the compliance and the application for 
certification with the U.S. authorities, and they work directly 
on a working level, on a management level, on a daily basis 
with EPA and CARB.
    Ms. Clarke. And so, do the Oxnard and Auburn Hills 
facilities work together?
    Mr. Horn. Now, yes, there's a structural change in terms 
of----
    Ms. Clarke. So, prior to the unveiling of this deception, 
they were separate entities? They didn't interface?
    Mr. Horn. Well, I think they worked together. My 
explanation is about the structure of the situation of these 
facilities. And they are now under one roof.
    Ms. Clarke. OK, but they collaborate?
    Mr. Horn. I hope so.
    Ms. Clarke. They are collaborators? Because, you know, my 
concern is that, if we have these facilities designed 
specifically to address the issues of emissions, of testing, 
and they failed, that speaks to a whole other level of perhaps 
collusion with respect to this whole software debacle.
    Have you looked at or done any internal investigation with 
respect to these facilities?
    Mr. Horn. That's part of the internal investigation, but my 
understanding is they're just testing on the basis of the legal 
test requirements.
    Ms. Clarke. So, the engineers would not have known software 
code? Is that what you are saying?
    Mr. Horn. I think that they have tested the dyno situation 
for the cars and they didn't do independent road tests. That's 
what I allude to.
    Ms. Clarke. OK. Let me jump to the whole idea of the 
environmental impact. How seriously does Volkswagen take its 
commitment to the environmental responsibility?
    Mr. Horn. This is deeply--also, maybe it's difficult to 
understand now in this context--but it is deeply embedded in 
our corporate culture. We have three values which is 
innovative, valuable, and responsible, and responsible towards 
our employees and the environment.
    Our plant in Tennessee is a Platinum LEED certification. 
This is the most clean and energy-efficient plant in the world. 
And all of our plants have a commitment to reduce carbon 
footprint by 25 percent in 2018. And whether these plants are 
in India, newly built, or in China, they are always up really 
to the highest Volkswagen standards, which go beyond sometimes 
conventional standards.
    Ms. Clarke. So, if this is part of the corporate culture--
--
    Mr. Horn. Yes.
    Ms. Clarke [continuing]. I am assuming that that is 
throughout, including your engineers and scientists, that this 
is sort of a part of the ethos. How do you explain this 
deviation, a massive deviation?
    Mr. Horn. Myself and the majority of all Volkswagen 
employees, which is 600,000, asked the same question, the same 
question, and it's a relevant question. And I hope that these 
investigations will definitely find out what drove those 
people, beyond newspaper articles and what we read out there, 
what drove those people into these decisions, into these 
actions.
    Ms. Clarke. Hope it won't be profits.
    I yield back, Mr. Chairman.
    Mr. Murphy. Mr. Tonko is recognized for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chairman.
    Mr. Horn, these vehicles promised unrivaled fuel economy 
and performance without the NOx emissions usually associated 
with diesel. I know other members have asked about how 
Volkswagen intends to make consumers whole, and I do want to 
lend my voice to that briefly.
    Because consumers, including people in my district, 
purchased a car believing it would be a clean, environmentally 
friendly choice, they have every right to feel defrauded. 
Consumers were sold a bill of goods that simply does not exist.
    And I think it is likely that whatever fixes to comply with 
emissions standards will hurt the vehicles' performance in 
other ways. This is not what consumers thought they were 
buying, and it is not what dealers thought they were selling. 
Worse still, the resell value on these vehicles, which I am 
sure was a selling point, has certainly been destroyed. So, 
Volkswagen has a lot to think about, I believe, in terms of how 
it intends to make right by consumers.
    Now let me ask, typically, when deciding whether to issue a 
recall and develop a solution, does Volkswagen conduct its own 
emissions testing?
    Mr. Horn. Yes.
    Mr. Tonko. And did you try to recreate or confirm the 
results of the ICCT study from May of 2014?
    Mr. Horn. I can't speak to this, what they specifically 
tested. In July 2014, I was informed that they have basically 
acknowledged the testing results and were developing those 
fixes in order to bring those cars back into compliance.
    Mr. Tonko. Now a lot was said about defeat devices, and we 
are talking about a defeat device here. Has the Volkswagen 
operations been impacted by defeat devices in the past?
    Mr. Horn. I have, in the context after September 3rd, 
understood that there was an issue, for instance, here in 1974, 
yes. That's what I understand.
    Mr. Tonko. And so, what measures were taken by the company 
to make certain that there was better scrutiny, better 
oversight of the potential for defeat device application?
    Mr. Horn. At that point of time, that's a great question, 
and I can't get you the answer now.
    Mr. Tonko. But was something done?
    Mr. Horn. In 1974, I was 12 years old. I don't know.
    Mr. Tonko. Well, history is history. We missed some of 
that. So, we reach to the books and read about it. What was 
done, if anything----
    Mr. Horn. Yes.
    Mr. Tonko [continuing]. To address defeat device 
application?
    Mr. Horn. And I think the investigations will go back into 
this time and----
    Mr. Tonko. Well, I don't think we need to investigate that. 
Did a corporate measure get put into play to address defeat 
devices?
    Mr. Horn. Back then, I don't know the answer, no, sir.
    Mr. Tonko. I would hope you could provide that to the 
committee. I am certain the record will be open.
    Mr. Tonko. And if I could just confirm some of the 
information we have received, Volkswagen initiated a voluntary 
recall in December of 2014 that was intended, in part, to 
address the issue of excess NOx emissions, is that correct?
    Mr. Horn. Excuse me. Could you repeat the question, please?
    Mr. Tonko. Right. Volkswagen initiated a voluntary recall--
--
    Mr. Horn. Yes.
    Mr. Tonko [continuing]. In December of 2014?
    Mr. Horn. That's correct, yes.
    Mr. Tonko. That's correct? Who at Volkswagen proposed the 
recall?
    Mr. Horn. The Technical Engineering Department in 
conjunction with the Product Safety Committee worldwide, which 
is steering all the recalls campaigns and voluntary recall 
actions out of Wolfsburg essentially for all the markets.
    Mr. Tonko. And what explanation was given to consumers 
about why that December 2014 recall was necessary?
    Mr. Horn. I would have to look into the document on what we 
wrote to those consumers. I don't know now.
    Mr. Tonko. You will provide that to the committee, please?
    Mr. Horn. Definitely. It's public. It's public anyhow.
    Mr. Tonko. And what explanation was given to regulators 
about why that December 2014 recall was necessary?
    Mr. Horn. That's also something we will have to provide in 
the document, with the documents.
    Mr. Tonko. And what fix did the Volkswagen organization 
implement for cars brought in under that recall?
    Mr. Horn. All have been software fixes. New software 
versions have been fleshed into the specific onboard steering 
units.
    Mr. Tonko. And who at Volkswagen developed that fix?
    Mr. Horn. The Engine and Drivetrain Development, Software 
After-Treatment Departments in Germany, Wolfsburg.
    Mr. Tonko. And did they know at the time that it would not 
work?
    Mr. Horn. I don't know that. My understanding was that it 
would work and, otherwise, also the work by the Product Safety 
Committee wouldn't have released this version for application 
in the markets.
    Mr. Tonko. Well, I thank you for your responses. I look 
forward to the additional information you owe to the committee.
    And again, I would say on behalf of the consumers of the 
20th Congressional District of New York, those of the country, 
and around the world impacted by this, they deserve a sound 
explanation and a fix that will respond to the environmental 
damage done here and the consumer fraud.
    Mr. Horn. Yes, sir. Thank you.
    Mr. Murphy. Thank you.
    Ms. DeGette has one final question real quick, and then, we 
have got to leave.
    Ms. DeGette. First, Mr. Chairman, I ask unanimous consent 
to put Mr. Welch's document into the record.
    Mr. Murphy. So ordered.
    Ms. DeGette. I just have oen last question, Mr. Horn, 
because you told a whole bunch of us on this committee that, 
after that West Virginia University study in May of 2014, 
everybody was running around trying to figure out what was 
going on with these cars and why there was a discrepancy 
between the tasks, that your engineers didn't know the answer. 
But, in fact, the discrepancy was because of a willful act of 
some engineers in Germany in the first place, correct?
    Mr. Horn. That's my understanding, yes.
    Ms. DeGette. And those people, that information about that 
discrepancy never made it to Germany, so they could tell your 
people what was wrong? Is that what you are testifying to here 
today?
    Mr. Horn. I don't understand what you're trying to say.
    Ms. DeGette. Well, you said your people were trying to 
figure out why there was a discrepancy.
    Mr. Horn. Right.
    Ms. DeGette. But there were some people who knew, and those 
were the people who wrote that deceptive code in the first 
place. Are you telling me that they never told your U.S. people 
what the problem was and why there was a discrepancy?
    Mr. Horn. The people who investigated the study in detail 
and developed those software fixes were also the colleagues in 
Germany. Of course, they were informing their U.S. colleagues 
in Auburn Hills.
    Ms. DeGette. So, did they tell the U.S. colleagues that 
there was this deceptive code and that was what was causing the 
discrepancy, yes or no?
    Mr. Horn. I don't think so. I don't think so.
    Ms. DeGette. Thank you.
    Mr. Horn. Otherwise, we would be much earlier here.
    Mr. Murphy. Thank you.
    Mr. Horn, that concludes our questioning for now. This 
hearing is not over, but we would appreciate--more questions 
will be coming from committee members--we would appreciate a 
quick and honest response to those as well.
    Mr. Murphy. This hearing is going to adjourn for a couple 
of hours while the Republican Conference is meeting. We will 
reconvene about 15 minutes after the call of the Chair after 
that meeting.
    Thank you much. We will be back.
    Mr. Horn. Thank you.
    Mr. Murphy. And thank you.
    [Whereupon, at 12:18 p.m., the subcommittee recessed, to 
reconvene at 1:39 p.m. the same day.]
    Mr. Murphy. All right, we reconvene this Subcommittee on 
Oversight and Investigations hearing on Volkswagen's Emissions 
Cheating Allegations: Initial Questions.
    We have Mr. Grundler and Mr. Brooks here as witnesses.
    And let me just go into this, as we reconvene this hearing.
    You are aware that the committee is holding an 
investigative hearing, and when doing so, has the practice of 
taking testimony under oath. Do you have any objections to 
testifying under oath?
    Mr. Brooks. No.
    Mr. Grundler. No.
    Mr. Murphy. Both witnesses say no.
    The Chair then advises you that, under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do either of you desire to be advised by 
counsel during your testimony today?
    Mr. Brooks. No.
    Mr. Grundler. No.
    Mr. Murphy. Both witnesses indicate no.
    In that case, would you please rise and raise your right 
hand, and I will swear you in?
    [Witnesses sworn.]
    Mr. Murphy. Thank you.
    For the record, both witnesses have indicated yes. You are 
now under oath and subject to the penalties set forth in Title 
18, Section 1001, of the United States Code.
    We will now allow you each to give a 5-minute summary of 
your opening statement.
    Mr. Grundler, you may begin.

    STATEMENT OF CHRISTOPHER GRUNDLER, DIRECTOR, OFFICE OF 
 TRANSPORTATION AND AIR QUALITY, OFFICE OF AIR AND RADIATION, 
ENVIRONMENTAL PROTECTION AGENCY, ACCOMPANIED BY PHILLIP BROOKS, 
    DIRECTOR, OFFICE OF CIVIL ENFORCEMENT, AIR ENFORCEMENT 
   DIVISION, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, 
                ENVIRONMENTAL PROTECTION AGENCY

    Mr. Grundler. Chairman Murphy, Ranking Member DeGette, and 
other members of the subcommittee, we appreciate the 
opportunity to testify on the matter of the Environmental 
Protection Agency's Notice of Violation issued to Volkswagen.
    I am Chris Grundler and I direct the EPA's Office of 
Transportation and Air Quality, which is responsible for EPA's 
Air Pollution Compliance Program for all mobile sources, 
vehicles, engines, and equipment, including cars, trucks, and 
fuels.
    I am joined today by my colleague Phil Brooks, Director of 
the Office of Civil Enforcement's Air Enforcement Division. 
EPA's Civil Enforcement Program develops and prosecutes civil 
administrative and judicial cases.
    On September 18th, 2015, EPA sent a Notice of Violation, an 
NOV, of the Clean Air Act to Volkswagen, including Volkswagen 
AG, Audi AG, and Volkswagen Group of America, Inc., alleging 
that four-cylinder Volkswagen and Audi diesel cars sold in the 
U.S. for model years 2009 to 2015 include software that 
circumvents EPA's emissions standards. Volkswagen manufactured 
and installed software in the electronic control module of 
these vehicles that sensed when the vehicle was being tested 
for compliance with EPA emissions standards. Put simply, these 
cars contain software that turns off or significantly reduces 
the effectiveness of emissions controls when driving normally 
and turns them on when the car is undergoing an official 
emissions test.
    This is known as a defeat device. This design feature 
results in the cars emitting up to 40 times the emissions that 
are allowed to ensure public health is protected. These devices 
contain essentially a switch that senses whether the vehicle is 
being tested or not based on various inputs, including the 
position of the steering wheel, vehicle speed, the duration of 
the engine's operation, and barometric pressure. The NOV that 
EPA issued covers roughly 482,000 diesel cars.
    All new cars sold in the United States must have an EPA-
issued Certificate of Conformity demonstrating that the car 
meets applicable Federal emissions standards to control air 
pollution. By making and selling vehicles with defeat devices 
that allow for higher levels of air emissions than were 
certified to EPA, VW violated multiple important Clean Air Act 
provisions. These violations are very serious not only because 
the illegal defeat device results in excess emissions many 
times the allowable standard, but also because, after the high 
emissions were discovered, VW concealed the facts from EPA, the 
State of California, and from consumers.
    These vehicles are emitting more nitrogen oxides, or NOx, 
than regulations allow. NOx pollution contributes to ground-
level ozone and particulate matter. We know that exposure to 
these pollutants has been linked with a range of serious health 
effects, including increased asthma attacks and other 
respiratory illnesses that can be serious enough to send people 
to the hospital.
    We are in the midst of an ongoing investigation into VW's 
actions. We will be working closely with the U.S. Department of 
Justice throughout this investigation, and determinations 
regarding potential penalties and other remedies will be 
assessed as part of the investigation. However, at this point 
we are unable to provide further details of the investigation 
because the release of such information could jeopardize this 
ongoing enforcement investigation.
    EPA will continue to work closely with the California Air 
Resources Board during the investigation. CARB led and 
contributed much of the effort to get us to this point. Our 
agencies work very closely together on the implementation and 
oversight of the Vehicle Emissions Programs.
    As part of the investigation, we intend to assess the scope 
of VW's liability under the Clean Air Act and whether there are 
additional vehicles with defeat devices. We also intend to 
assess the economic benefit to VW of noncompliance and pursue 
appropriate penalties, as well as to assess the excess 
pollution from VW's violations and the appropriate ways to 
mitigate them.
    While our enforcement authority concerns air pollution, we 
are acutely aware of the impact of these violations on 
consumers, and we have provided frequently asked questions and 
answers for consumers on our Web site, such as whether the cars 
are safe to drive and whether EPA is officially recalling the 
vehicles at this point.
    On September 25th, my office sent a letter to all auto 
manufacturers notifying them that we are stepping up our 
testing activities in response to these alleged violations. 
Over the 40-plus-year history of our program, we have 
continuously updated and adapted our approaches to compliance 
oversight as technologies and situations have changed. We take 
very seriously our responsibility to oversee the implementation 
and enforcement of our regulations.
    It is this oversight that ensures the benefits of clean air 
emissions standards are realized and that the industry is 
competing on a level playing field, and that consumers are 
getting what they pay for.
    Again, thank you for the opportunity to appear as witnesses 
this morning. We welcome your questions.
    [The prepared statement of Mr. Grundler and Mr. Brooks 
follows:]
[GRAPHIC] [TIFF OMITTED] T9793.004

[GRAPHIC] [TIFF OMITTED] T9793.005

[GRAPHIC] [TIFF OMITTED] T9793.006

    Mr. Murphy. Thank you.
    Mr. Brooks, you don't have a statement? You issued a joint 
statement, correct?
    Mr. Brooks. That is correct.
    Mr. Murphy. OK. Thank you.
    Now I am going to recognize myself for 5 minutes.
    When you speak, just make sure you turn the mic on and 
bring it as close to your mouth as possible.
    So, Mr. Grundler, in December of 2014, VW conducted a 
voluntary recall to address the on-road emissions, as you know. 
What information did VW convey to you about the cause and the 
proposed solution for the higher emissions in advance of that 
recall?
    Mr. Grundler. Thank you, Mr. Chairman.
    Throughout 2014, once California and EPA learned of these 
excess emissions, there were numerous technical conversations 
between the California Air Resources Board and Volkswagen. 
California took the lead on exploring what the problem was with 
these vehicles, and my understanding is that they received 
multiple different stories, plausible reasons why these 
vehicles may not be performing as they are supposed to, 
chemical-based reasons, physical-based reasons.
    At the end, the remedy that was proposed was described to 
fix a problem with the vehicle concerning how it is operated 
under different temperatures, what kind of dosing sensors were 
used to make the emissions control system work properly, and 
that they were confident in the fix.
    At the time, they were told by the State of California to 
proceed, but that California was going to test these vehicles 
to make sure that the fix was effective. And it was not 
effective, based on the subsequent testing by the California 
Air Resources Board.
    Mr. Murphy. Thank you.
    Did you conduct any further evaluation of their conclusions 
and proposed solutions in advance of the recall? So, what was 
the operational process you had in interacting with them, 
discussions/conversations that go back and forth?
    Mr. Grundler. So, EPA and California have a very strong 
partnership when it comes to oversight and compliance. 
Sometimes California takes the lead on these matters. Sometimes 
EPA takes the lead on these matters. For example, last year we 
had the lead with respect to the Hyundai/Kia investigation and 
subsequent action. California volunteered to take the lead on 
this matter.
    And what happened during 2014 is essentially what is 
happening right now as we speak, which is trying to determine 
what is the right recall solution to address these excess 
emissions. It was VW's responsibility to identify what was 
wrong and to propose a fix. They did so. That fix did not work.
    So, most of these interactions were between California and 
the company. EPA, my team, participated in some of them. We 
became much more actively involved in 2015, when California 
produced their test results on the supposed fix of these 
vehicles and that data showed that there still remained very 
high and unexplained excess emissions.
    Mr. Murphy. Who did you have these conversations with, with 
VW, going back and forth, communicating while they are working 
or they are talking to you about these results? Do you recall 
who that was?
    Mr. Grundler. So, I want to be clear. I was not part of 
those conversations. It was my team and the California 
counterparts. My understanding is those conversations included 
both officials from VW of America as well as officials from 
Germany.
    Mr. Murphy. Do you know their names for the record?
    Mr. Grundler. I do not.
    Mr. Murphy. Can you identify those? Are those things you 
could get for us?
    Mr. Grundler. Yes.
    Mr. Murphy. Would you please do so? That would be 
important.
    Mr. Murphy. Now I have a technical question. I am not sure 
if either of you can answer this. So, here is this switch that, 
when it is in one position for an emissions test, it made a 
change in how this was operational, so the emissions would be 
lower. In the other position, the emissions were quite high. Is 
it possible to just keep that switch in the position of low 
emissions, and then, they could be in compliance or does that 
damage the engine or reduce power significantly? Do you have 
any idea?
    Mr. Grundler. Well, those are exactly the same kind of 
questions we are asking Volkswagen right now. It's not actually 
a switch, sir. It is what we call a dual-calibration strategy. 
So, the vehicle is programmed to work two different ways. And 
when the vehicle senses when it's on a test, it very quickly 
goes into clean mode, and when it does not sense the very 
specific parameters that are specified in our Federal test 
procedures, it goes into a high-pollution mode.
    So, I think what you're asking is----
    Mr. Murphy. Yes, that's what we----
    Mr. Grundler [continuing]. Can you just take this software 
and will the vehicle operate normally? And we don't know yet. 
We're asking those questions. And the answers will depend, as 
you heard this morning, on which generation of diesel engines 
we're talking about. We believe that the newer generation, the 
so-called Generation 3 engines, will be much easier to fix than 
the older versions.
    Mr. Murphy. Thank you. I am out of time now.
    Ms. DeGette, 5 minutes.
    Ms. DeGette. Thanks.
    Just to continue along, the newer versions, they have these 
Urea Tanks.
    Mr. Grundler. Right.
    Ms. DeGette. And so, it is a system that you can both 
adjust the NOx filters and the Urea Tanks? And in fact, the VW 
dealer, the dealer in Denver and also their mechanics told me 
they feel like it would be a pretty easy adjustment, even just 
in the codes, to fix it in the 2015 and 2016 models. Is that 
your understanding, Mr. Grundler?
    Mr. Grundler. I don't want to speculate that.
     Ms. DeGette. Yes.
    Mr. Grundler. That seems logical to us.
    Ms. DeGette. Right.
    Mr. Grundler. We want to see the software. We want to test 
the vehicle before----
    Ms. DeGette. Obviously, yes.
    Mr. Grundler [continuing]. Any further action is taken.
    Ms. DeGette. Yes, obviously.
    Mr. Grundler. You can imagine that we're skeptical.
    Ms. DeGette. But it is the agency's position that these 
vehicles do need to be fixed, right?
    Mr. Grundler. Absolutely.
    Ms. DeGette. I mean, they are noncompliant under both 
Federal law and California State law?
    Mr. Grundler. That is correct.
    Ms. DeGette. You know, I think some of the impressions 
given by Volkswagen is, well, you know, they are safe to drive. 
They might be safe to drive, but they don't comply with the 
emissions standards, right?
    Mr. Grundler. That's right.
    Ms. DeGette. So, for the cars between 2009 and 2014, the 
fix is a bigger problem because they don't have the Urea 
Containers. And so, it is harder to see how, without major 
structural changes to these cars, how they could be brought 
into compliance? Is that your understanding?
    Mr. Grundler. That is correct. They will require a more 
substantial engineering solution.
    Ms. DeGette. They are either going to require installation 
of a Urea System or different NOx filters or both. So, that is 
going to be quite elaborate. I am not a mechanic, and I don't 
pretend to be one, but I went over and looked at this. And it 
looked like a very knotty problem to me.
    Mr. Grundler. What California and EPA have directed 
Volkswagen to do is to present more than one option on how to 
address these excess emissions. And we want to look at these 
options very carefully, particularly with respect to what 
impacts they will have on the owners.
    Ms. DeGette. Right. And have you given VW any kind of a 
deadline for coming up with that fix or have they indicated to 
you when they might be able to come up with this? This is 
something that really concerned the panel in the earlier 
conversations today.
    Mr. Grundler. I can assure you we have a very strong sense 
of urgency. We are pressing Volkswagen for that plan and for 
those solutions. We're meeting with them on practically a daily 
basis. We hope to get a proposal very, very soon. But we want 
to make sure that it's effective. So, there's some risk in 
rushing, but we expect to see something as early as next week 
with respect to the Generation 2 vehicles.
    Ms. DeGette. And has the company told you that they believe 
they can fix the affected vehicles without affecting fuel 
economy, engine performance, or both?
    Mr. Grundler. They have not said so.
    Ms. DeGette. OK. So, I just want to say one last thing, 
which is oftentimes we have the EPA in here, and sometimes it 
is not the most pleasurable experience testifying. But in this 
case the Director of the International Council on Clean 
Transportation, which was the organization that commissioned 
the West Virginia study, said, quote, ``This is a powerful 
affirmation of U.S. Federal and California vehicle emissions 
regulations and of the agencies. Clear protocols, in-use 
requirements for the useful life of vehicles, clear enforcement 
follow-through, the authority to fine and force recalls, these 
are the best practices that regulations worldwide should 
incorporate, and today's announcement shows why.'' End quote.
    So, thank you and your agency for your efforts here.
    I want to ask you, Mr. Grundler, in light of VW's 
deception, are you adjusting testing going forward?
    Mr. Grundler. Yes, and we already have.
    Ms. DeGette. And what have you done?
    Mr. Grundler. Well, we have learned from this episode for 
sure. We wish we had found it sooner. As soon as we learned of 
this data, CARB and EPA focused----
    Ms. DeGette. So, how are you adjusting the testing going 
forward?
    Mr. Grundler. The bottom line, madam, is that we are going 
to be unpredictable. What is required for a robust compliance 
and oversight program is both testing of new vehicles in the 
lab, testing of what we call in-use vehicles in the lab as on-
road measurements.
    Ms. DeGette. Thanks. I don't have much time.
    Mr. Brooks, are you adjusting enforcement efforts going 
forward and, if so, how?
    Mr. Brooks. Thank you for the question. The answer is yes, 
although I think the prosecution, the investigation of this 
matter will proceed along our normal path. I think what we will 
see is we will be getting a lot more phone calls from people. 
And so, in that way, it will change. We will have more to 
respond to.
     Ms. DeGette. Thank you.
    Thank you very much, Mr. Chairman.
    Mr. Murphy. I think Mr. Griffith is next. Mr. Griffith, you 
are next for 5 minutes.
    Mr. Griffith. Thank you very much, Mr. Chairman.
    And I appreciate you all being here and appreciate the 
questions that have already been asked.
    Obviously, there are a number of us, if you were listening 
to the previous testimony, you know I am one of the people who 
owns one of the diesel Volkswagens. And so, I have some 
questions in that regard.
    I think it is important that you change your testing 
methods. The first question I am going to ask you is, do you 
think it might be helpful in doing your job if we passed some 
legislation that would allow a portion of the fine money in a 
fraud case like this to go to the university that discovered 
it? I mean, WVU discovered the problem. You all didn't.
    Believe it or not, I don't think the EPA can and should do 
everything, and that this might be of some assistance. Just 
like we do with certain bad actors in other criminal-type 
settings who are committing fraud on consumers or selling 
drugs, we take some of their ill-gained goods. We take it away 
from them, and the Government gives it back to some of the 
folks who helped discover it, law enforcement and prosecutors. 
Do you think that might be a helpful piece of legislation for 
us to take a look at? Either one of you, or both.
    Mr. Brooks. Well, I don't think I could comment on what 
legislative changes might be necessary. I do understand that in 
the criminal context those kinds of remedies have been imposed 
before.
    Mr. Griffith. So, the question is, if you have that power 
now, please tell us.
    Mr. Murphy. Excuse me one second.
    Could you speak close to the mic? None of us can hear you. 
You are going to have to sit forward and into the mic.
    Mr. Griffith. If you currently have that power, then let me 
know that. But, if you don't have that power, in other words, 
whenever you come up with the fine that is appropriate for 
Volkswagen, it would seem to me--and I don't know that you have 
that authority now--to give WVU, West Virginia University, that 
uncovered this problem part of the fine to help them continue 
their research. I mean, that is what we do with prosecutors. We 
do that with law enforcement agencies who uncover crime. We do 
that in some securities cases. There are different ways that is 
done.
    Do you all think that would be an authority that would be 
helpful for the people of the United States of America?
    Mr. Brooks. Well, I can take that back and we can respond 
in writing.
    Mr. Griffith. All right.
    Mr. Griffith. It sounds like a good idea to me, I will just 
tell you.
    It is interesting that WVU found it and that you all did 
not, but I understand you can't do everything. And you have 
answered some questions about how you are going to go forward.
    Let's go to the other side of this. Now I will, whatever 
you all come up with and whatever Volkswagen comes up with, I 
will get my car fixed. Or, if they do a buy-back program, I 
will have to debate whether it is better to fix it or to sell 
it back to the company because it is not doing what it is 
supposed to.
    But I am just curious, at some point--and right now, I 
understand you are not doing that right now--but, at some 
point, am I going to be subject, or other consumers in my 
shoes, are they going to be subject, to penalties from the EPA 
for driving a vehicle that doesn't meet the standards that were 
supposed to be in place when they bought the vehicle?
    Mr. Grundler. That question depends on where the particular 
owner of a Volkswagen, of one of these vehicles, lives. If you 
live in an area that does regular emissions tests, that the 
State conducts these inspections, emissions inspections, some 
States require that, in order to re-register the vehicle, if it 
is subject to a recall, to show that the fix has been made. 
Other States do not have that requirement. It depends on where 
you're living.
    Mr. Griffith. OK. So, for some people who may not be paying 
attention to whatever notices they might get or, for whatever 
reason, aren't following the news--and believe it or not, 
there's a whole bunch of those folks out there who don't follow 
day-to-day news--they could actually end up with some kind of a 
penalty from their State. But, currently, there is nothing 
nationally?
    Mr. Grundler. That's right.
    Mr. Griffith. Would you anticipate that the EPA would go in 
the direction of some kind of a national program if enough of 
the cars did not get bought back or fixed after a certain 
number of months?
    Mr. Grundler. We certainly will be encouraging consumers 
to----
    Mr. Griffith. I understand that. You are going to get the 
word out as best you can?
    Mr. Grundler. That's right, but----
    Mr. Griffith. But they don't get the message. There's still 
a million cars, or 100,000 cars, I think.
    Mr. Grundler. I would not anticipate----
    Mr. Griffith. You would not anticipate that?
    Mr. Grundler [continuing]. EPA going after individuals.
    Mr. Griffith. But it is a possibility?
    Mr. Grundler. I don't think that's a possibility under the 
Clean Air Act.
    Mr. Griffith. Because let me tell you one of my concerns 
is--and it doesn't have anything to do with you all, and it is 
a rhetorical question, so you don't have to answer it. I will 
tell you that upfront. But yesterday we had an EPA official in 
and we were talking about the Clean Power Plan and the cap-and-
trade scheme, which they didn't call it the cap-and-trade 
scheme, they kept resisting that. But it talks about putting a 
limit on emissions and, then, being able to make trades. So, it 
sounds like cap-and-trade.
    And what was interesting about it was that I had a list of 
quotes from Lisa Jackson in 2011, Gina McCarthy 2011, Gina 
McCarthy 2013, Gina McCarthy 2014, that said they were never 
going to consider--and, in fact, it wasn't allowed under the 
law--to do a cap-and-trade scheme. And then, I am looking at 
some cap-and-trade scheme.
    So, I am a little concerned, not for me. I am going to do 
what I need to do to make my car right or get rid of it. But 
there are going to be a lot of folks out there who may be 
caught, and I just want to make sure that the EPA isn't 
doubling down on their damages, because every one of us that 
bought one of these vehicles is damaged in some form or 
another.
    So, I appreciate you listening to that. If you want to 
answer, I will give you a chance to answer. Mr. Brooks looks 
like he wants to answer.
    Mr. Brooks. I will assure you that I am aware of absolutely 
no provision of the Clean Air Act which would allow a 
prosecution for the things that you are talking about.
    Mr. Griffith. And that is exactly what Lisa Jackson told us 
2 or 3 years ago, but that is OK. We will move on.
    You know, last but not least----
    Mr. Brooks. I'll say it won't happen.
    Mr. Griffith. Yes. On Gen 1 cars, I have read somewhere 
that it is going to take--it is a more complicated fix, we 
heard this morning, but it is also going to take up some of the 
space probably in the trunk area of the vehicle. Have you all 
heard that?
    Mr. Grundler. Sir, that would depend completely on what the 
remedy would be. And as I said earlier, we are going to take a 
very careful look at what impact this is going to have on 
owners and consumers. That will be central to how we review the 
options that Volkswagen comes forward with. So, we don't know 
that yet.
    Mr. Griffith. All right. I appreciate it very much. Thank 
you all for being here.
    I yield back.
    Mr. Murphy. The gentleman yields back, and I recognize Mr. 
Pallone for 5 minutes.
    Mr. Pallone. Thank you.
    Mr. Grundler, one of the concerns that I raised with Mr. 
Horn earlier was this concern about whether we might find these 
defeat devices or similar problems with other cars. So, I 
wanted to ask the question, do you have the tools and authority 
you need to ensure there are no other cheaters out there?
    Mr. Grundler. Yes, we do.
    Mr. Pallone. But I am also concerned about--and maybe this 
is for Mr. Brooks--about the comments that Mr. Horn made where 
he suggested, you know, there were a couple of rogue engineers 
that may have done this, but suggested that there was no 
corporate responsibility.
    Is it the EPA or is it the AG? Who goes after the 
individuals, corporate or otherwise, that might be responsible 
for this? Or do you at some point envision even bringing 
charges, you know, like criminal charges against the 
corporation itself for this intentional deceit?
    Mr. Brooks. Thank you for the question. I can't speculate 
now as to exactly what course all the enforcement actions will 
take. I can tell you that my office has already taken the 
initial enforcement action, and I can tell you that we are 
working with the Department of Justice on these matters.
    Mr. Pallone. But I guess what I am asking--and I won't keep 
repeating, but one more time--you know, we keep talking about 
the fines because of what happened. But does this rise to 
individual responsibility for those responsible? And is there 
such a thing as criminal action against the corporation? I 
mean, I know I am speculating, but are those possibilities?
    Mr. Brooks. Let me be careful in answering that. First of 
all, I think that the concern that has been expressed here by 
Members is exactly our concern: Who, what, when, where, why, 
how? And so, I'm quite certain that the investigations that are 
ongoing and that will be begun will get into exactly that.
    I think it would be unfair for me to say much more about 
what the end result might be.
    Mr. Pallone. But it is a possibility?
    Mr. Brooks. Certainly it is a possibility.
    Mr. Pallone. OK. You know, I was glad that Mr. Horn 
actually said that he understood the impact of these emissions, 
and they could have health and safety impacts. I mean, he did 
say that.
    But does it go beyond that? I mean, in other words, you 
know, he is admitting that this took place and that there could 
be some health and safety impacts because of the increased 
emissions. How does the EPA hold Volkswagen responsible for the 
environmental effects of their decision to evade emissions 
standards? In other words, does the EPA consider, is it 
possible that they could be held responsible for the impact on 
essentially dirtier air, not just fix the cars, but that there 
might be some damages or some kind of payment that would have 
to be made because the air was made dirtier or that people's 
health and safety were impacted?
    Mr. Brooks. Thank you for that question. The answer to that 
is yes. While it may go by different names, we tend to talk 
about it in terms of mitigation, but the concept there is 
exactly what you articulated. We're looking for the 
opportunities, the ways in which the damage that has been done 
to the environment, and which consequently has impacts on 
public health, can be addressed.
    Obviously, we can't go back in time and take that pollution 
back out of the air, but many of our settlements look forward 
and ask the question, how is it that we can make air quality 
better than what the law minimally requires in any given 
instance? And that additional reduction in pollution is what we 
refer to as mitigation, and we have many, many consent decrees 
that go about doing that in many different ways.
    Mr. Pallone. So, for example, you could impose some 
penalties that might be used to mitigate air pollution in other 
ways possibly, not by VW, but, you know, that the EPA would use 
that money somehow to mitigate air pollution in some other way? 
Just give me an example, and then, I will stop asking, because 
my time is almost up anyway.
    Mr. Brooks. OK. A lot of the power plant cases we have had 
projects, for example, where the company has had to go out and 
find a third party to implement a wood stove changeout program, 
so that cleaner burning stoves, more efficient wood stoves are 
substituted for dirtier stoves. And that has a direct impact on 
air quality in communities because there are lots of 
communities out there, as I'm sure you know, that rely very 
heavily on wood-burning devices. So, that's one example.
    Mr. Pallone. All right. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Murphy. The gentleman yields back.
    I recognize Dr. Burgess for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman, and I apologize for 
being out of the room for part of the hearing. So, I am going 
to ask a couple of questions. If they have been asked before, 
please bear with me and try to give an answer that is 
consistent with how you answered previously.
    First off, what is the budget for the EPA currently?
    Mr. Grundler. I don't have the budget for the entire EPA. I 
can give you the budget for my organization.
    Mr. Burgess. Sure, we will take that.
    Mr. Grundler. So, it's roughly $100 million a year and 340 
full-time people that work in my organization.
    Mr. Burgess. The overall budget for the EPA--and I am just 
relying on memory, which is dangerous--but I think it is close 
to $15 billion. So, the EPA has resources available. It has 
funding available.
    Mr. Grundler. I do want to correct that. I think EPA's 
budget is around $7 billion and about 15,000 people, roughly.
    Mr. Burgess. Nevertheless, West Virginia University had a 
budget for this research project, my understanding is, around 
$50, $60, $70 thousand, is that correct?
    Mr. Grundler. We are extraordinarily grateful for the work 
that West Virginia University and the ICCT did. And I am not 
going to blame our budget for the fact that we missed this 
cheating.
    I do think we do a very good job of setting priorities at 
EPA. Once we learned of these excess emissions, we focused on 
it. We didn't ignore it. And then, we have also immediately 
changed how we are doing our testing regime to be more 
unpredictable, so this doesn't happen again in the future.
    Mr. Burgess. Well, with all due respect, just looking at 
the situation, I think the American people ought to ask that we 
fire you and hire West Virginia University to do our work. They 
certainly are much more cost-effective than this part of the 
Federal agency.
    Let me ask you this: I sit on another subcommittee. We have 
jurisdiction over the National Highway Traffic Safety 
Administration. So, I am familiar with safety recalls, but we 
heard Mr. Horn testify earlier today that this is not a safety 
issue with these cars as they are driven. There are emissions 
issues, but there are not safety issues. Is that correct?
    Mr. Grundler. That's correct.
    Mr. Burgess. So, does EPA do its own kind of recall that is 
separate and apart from the National Highway Traffic Safety 
Administration?
    Mr. Grundler. We do.
    Mr. Burgess. And would this be www.recalls.gov that is the 
Web site that consumers can go to, to find out information 
about the recall or the possible recall on their vehicle?
    Mr. Grundler. We have not ordered a recall yet. When we do, 
we will provide that information for sure.
    Mr. Burgess. That information will be on your Web site?
    Mr. Grundler. Yes.
    Mr. Burgess. So, I went to the Web site. In truthfulness, 
staff went to the Web site. They printed it off for me. I am 
very grateful for that.
    You can get information about pesticides, pesticide Web 
sites, EPA emissions recalls where I assume this would fall. Is 
that correct?
    Mr. Grundler. Yes.
    Mr. Burgess. When you click on that link, you get a ``Page 
not found. Website improvements underway.'' So, can you let 
consumers know when they are likely to be able to get that 
information off of your Web site?
    Mr. Grundler. Again, sir, we have not ordered a recall. So, 
there is no recall information. We have information on our Web 
site that talks about our Notice of Violation, what vehicles 
are covered, and what consumers need to know today, which is 
that they can drive these cars. These cars are safe to drive. 
They will not be held responsible for any repairs. That would 
be the responsibility of the company.
    Mr. Burgess. Let me ask you this because Mr. Pallone was 
asking you things about payment and damages, and because of the 
issue that the air was dirtier and health and safety have been 
impacted. So, it is, in all likelihood, Volkswagen of America 
is going to face some significant fines and penalties by the 
Environmental Protection Agency, are they not?
    Mr. Grundler. I think that's very likely.
    Mr. Burgess. And you heard my admonition to the CEO of 
Volkswagen of America: ``Don't be dismissive. Don't run from 
the fact that this has happened. You need to be aggressively 
compliant.'' And I hope they will be.
    But I have got to tell you, this summer I went to 
Silverton, Colorado, on my own dime and looked at what had 
happened to the Animas River, went to the Gold King Mine. And 
that was entirely created and caused by the Environmental 
Protection Agency.
    So, I have had a lot of people ask me that, if a private 
company had done that and turned the Animas River yellow, they 
would be held--the same thing we are talking about here--there 
would be fines, there would be mitigation costs. Does the EPA 
hold itself to the same standard to which it holds private 
corporations and, if not, why not?
    Mr. Grundler. Are you asking me to testify about the Gold 
King Mine situation?
    Mr. Burgess. Just in general. The EPA causes a problem. 
Should they be held to the same standards? And, no, I am not 
asking you to testify.
    In fact, Mr. Chairman, I think we should have a hearing on 
that as a separate issue.
    But just answer the question. Should EPA be held to the 
same standards to which you are going to hold a private 
corporation?
    Mr. Grundler. All I can say, sir, because I'm not familiar 
with all the details, is I certainly have seen and read that 
the Administrator has taken full responsibility for that 
situation and we're acting accordingly.
    Mr. Burgess. It looked like a scene out of 
``Ghostbusters.'' I will just tell you that.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Murphy. I do want to acknowledge that the gentleman 
from Virginia and the gentleman from Texas are both touting my 
neighboring State, West Virginia University, a rival of Pitt, 
but it is nice to see them get the accolades for doing such 
good work.
    I now recognize Ms. Castor for 5 minutes.
    Ms. Castor. Thank you, Mr. Chairman.
    Gentlemen, on September 18th, the EPA issued a Notice of 
Violation against Volkswagen. The notice alleges that certain 
Volkswagen and Audi diesel cars for model years 2009 to 2015 
include software that circumvents EPA emissions standards for 
certain air pollutants. According to EPA, the software produced 
by Volkswagen is a defeat device, as defined by the Clean Air 
Act.
    Mr. Grundler, I understand that VW admitted in August to 
installing defeat devices on their vehicles. That is correct? 
Correct? It is accurate?
    Mr. Grundler. I would describe it in mid-to-late August, 
California and we got a heads-up that they had, in fact, 
installed a defeat device, and we were officially notified on 
September 3rd.
    Ms. Castor. From Volkswagen?
    Mr. Grundler. Correct.
    Ms. Castor. And what specifically did VW tell EPA they had 
done to the engines to circumvent emissions standards?
    Mr. Grundler. We were informed that the vehicles had a 
dual-calibration strategy on their engine control units which 
allowed the vehicle to operate one way when it sensed it was 
being tested by the EPA and in a completely different way when 
the vehicle was on the road.
    Ms. Castor. And has VW provided EPA with an engine map that 
shows specifically how the defeat device works for each model 
car in which it was installed?
    Mr. Grundler. That is my understanding, but I would like to 
double-check that for you.
    Ms. Castor. OK. I understand the affected vehicles fall 
into three generations based on the model and the year. The 
defeat devices may work differently for each of these 
generations of vehicles.
    Mr. Grundler, at this point, does the EPA have a full 
understanding of how the defeat devices work in each of these 
generations of vehicles?
    Mr. Grundler. We do not. We still have many questions for 
Volkswagen to answer.
    Ms. Castor. OK. So, what else do you need and has VW been 
helpful? What else do they need to provide EPA to give you the 
information that you need?
    Mr. Grundler. The information that we're focused on now 
like a laser is what are they going to do to address these 
excess emissions and take this software off these vehicles, so 
that they comply. We don't need to know specifically how they 
cheated with each line of code. We have got some information on 
that, but I think the most important thing going forward is 
that those defeat devices are removed, that these vehicles are 
addressed in a way that will work for consumers and the 
environment.
    Ms. Castor. But you have said you have learned some lessons 
here.
    Mr. Grundler. We have.
    Ms. Castor. Does EPA have the expertise right now in-house 
or do you hire consultants that----
    Mr. Grundler. We do. We don't need to unpack 100 million 
lines of code to find these defeat devices. The bottom line is 
testing them in unpredictable ways, so that we activate these 
devices. That's the bottom line, is what's coming out of the 
tailpipe and does it meet our standard?
    Ms. Castor. Are you taking broader action now that you have 
learned these lessons about how software code can be 
deceptively used to avoid emissions standards? Do you have the 
expertise now to go and look at other code in other automobiles 
and trucks?
    Mr. Grundler. Yes, we do.
    Ms. Castor. Are you going to do that?
    Mr. Grundler. We are.
    Ms. Castor. Can you explain that a little bit further?
    Mr. Grundler. Yes. So, we have a number of different kinds 
of testing we do. So, we test every new model of vehicle. I'm 
sorry. We require the manufacturers to test every new model of 
vehicle and submit that data to us, which we review along with 
design. We audit a certain percentage of those by testing them 
in our laboratory on prescribed test cycles. And we also audit 
by measuring real-world emissions using these mobile devices. 
And it is going to be, going forward, a combination of both 
laboratory testing, activity testing--we know how to download 
this software--as well as this real-world monitoring.
    Ms. Castor. And back to VW, does EPA know yet whether VW 
can successfully fix the cars here in the U.S.?
    Mr. Grundler. We don't know that yet.
    Ms. Castor. OK. And VW has a number of ongoing internal and 
external investigations. Has Volkswagen committed to sharing 
the results of those investigations with EPA?
    Mr. Grundler. They have not.
    Ms. Castor. Have you asked them----
    Mr. Grundler. Let me defer to my colleague here to confirm 
that.
    Ms. Castor. OK. So, have you asked them for that 
information?
    Mr. Grundler. They have not agreed at this time.
    Ms. Castor. Don't you think that would be a good--have you 
asked them whether or not they would share that information 
with EPA?
    Mr. Brooks. We have outstanding official document requests, 
and we will be promulgating more of those. Today we learned 
from this morning's session about one particular investigation, 
and that is certainly one that we----
    Ms. Castor. OK. Will you let the committee know if VW does 
not provide the results of their internal investigation?
    Mr. Brooks. Yes, we will.
    Ms. Castor. Thanks.
    And to Representative DeGette and Representative----
    Mr. Murphy. I'm sorry, we have a vote coming up, although 
if you have another question----
    Ms. Castor. I just wanted to make one point here and submit 
this with unanimous consent. Drew Kodjak, the executive 
director from the International Council on Clean 
Transportation, the nonprofit that discovered the issue, said 
the easiest solution is to give EPA more resources so it can 
perform the real-world testing, which may be more expensive, 
but he said, ``You don't want to rely on the happenstance 
investigation of a small NGO to trigger one of the largest 
global recalls around.'' So, that is the last thing for all of 
us.
    Mr. Murphy. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Murphy. We have got three members who need to ask 
questions. I have got 8 minutes and 50 seconds. Let's do it. 
So, if you can shorten your questions out of respect for the 
other members, please do. So, that takes us down to zero.
    How many votes do we have?
    Ms. DeGette. Two votes.
    Mr. Murphy. Two votes?
    All right. Dr. Bucshon?
    Mr. Bucshon. Yes, on September 25th, 2015, the agency 
announced that it would be conducting additional testing to 
evaluate use of defeat devices in all vehicles. What is the 
current status of the testing?
    Mr. Grundler. Thank you for that question. Our first 
priority is to test all light-duty diesel vehicles. We are in 
the midst of that testing. We have teamed up with California 
and Environment Canada, both who have the capabilities, as we 
do.
    Mr. Bucshon. And how many vehicles have you tested so far? 
Do you know?
    Mr. Grundler. We are still testing the first batch of 
vehicles.
    Mr. Bucshon. OK. What are you seeing so far?
    Mr. Grundler. I have not seen any data yet, sir.
    Mr. Bucshon. OK. And what criteria are you using and what 
is the procedure for implementing the testing, this testing?
    Mr. Grundler. We're being careful not to share with the 
automakers how we're going to do this new testing because we 
want to be unpredictable. But it will be a combination of both 
these five cycles that we test on today, what we call off-cycle 
dyno testing as well as this real-world onboard monitoring.
    Mr. Bucshon. And does this include all light-duty vehicles 
or just diesel technology?
    Mr. Grundler. We're starting with diesels.
    Mr. Bucshon. And then, would you be willing to commit to 
keeping the committee informed of your progress and provide us 
associated details regarding the testing procedures, data, and 
results?
    Mr. Grundler. Yes.
    Mr. Bucshon. And do you think that this is an isolated 
incident or do you have concerns with diesel technology in 
general?
    Mr. Grundler. I don't have concerns with diesel technology 
in general. I don't expect to find widespread problems, but we 
are going to be taking a very close look.
    Mr. Bucshon. OK. I yield back, Mr. Chairman.
    Mr. Murphy. Ms. Schakowsky is next, yes.
    Ms. Schakowsky. Thank you.
    Mr. Murphy. And we had asked members if you don't have a 
lot of questions to ask because we only have 6 minutes to get 
to the floor.
    Ms. Schakowsky. OK.
    Mr. Murphy. Thank you.
    Ms. Schakowsky. Mr. Grundler, whose job is it to make 
consumers whole?
    Mr. Grundler. We are not the Consumer Protection Agency. 
There are other Federal agencies and State agencies that have 
that responsibility. But, as I testified earlier, the consumer 
is going to be central to how we are reviewing the options to 
address these excess emissions.
    Ms. Schakowsky. So, let me ask you about the excess 
emissions now are violating the EPA standards, right?
    Mr. Grundler. Correct.
    Ms. Schakowsky. But we just heard testimony from 
Volkswagen, and I have a letter sent to owners that says you 
can still drive them. So, under what authority, then, does the 
EPA say that these cars that are emitting 10 to 40 times the 
allowed amount to continue to be on the road?
    Mr. Grundler. Well, the responsibility and the liability 
for those excess emissions lies with Volkswagen, and that's why 
we're conducting this investigation and learning what the 
remedy is, and then, pursuing mitigation to address the 
environmental harm.
    Ms. Schakowsky. But you already said that some States, if 
they were to bring their car in and for some reason that defeat 
device were not on, then the consumer actually could be 
responsible for the increased emissions. Is that right?
    Mr. Grundler. It's our understanding and belief that this 
defeat device will also defeat those State inspections. So, we 
do not expect these vehicles, were they to be called in for an 
annual or biannual inspection, to fail.
    Ms. Schakowsky. So, in the meantime, though, there are half 
a million cars running around that are emitting greater 
emissions.
    Mr. Grundler. Yes.
    Ms. Schakowsky. So, what, then, does the EPA do? We heard 
it could be for a year, maybe more than a year, before there is 
any real fix.
    Mr. Grundler. So, I don't know how long it is going to take 
to get the real fix, but the goal of our enforcement action 
will certainly be to make the environment whole. That is our 
job.
    Ms. Schakowsky. OK. So, you know already that there are 
half a million cars----
    Mr. Grundler. Yes.
    Ms. Schakowsky [continuing]. That consumers are told they 
can legally drive that are emitting more than your rules say?
    Mr. Grundler. Right.
    Ms. Schakowsky. So, what is happening now to hold them 
accountable for that? You don't have to test them. You know 
that they are already over the line.
    Mr. Grundler. The owners of these vehicles are innocent in 
this matter.
    Ms. Schakowsky. Right.
    Mr. Grundler. And we are working intently with California 
and the company to identify how to make these vehicles 
compliant. Once we are confident that we have the right remedy, 
we will order those recalls, and it will be the company's 
responsibility to fix those vehicles.
    Ms. Schakowsky. And in the meantime, will they be penalized 
for having these noncompliant cars?
    Mr. Grundler. The consumers?
    Ms. Schakowsky. No.
    Mr. Grundler. The company?
    Ms. Schakowsky. The company.
    Mr. Grundler. No. No, that will be the result of our 
ongoing investigation. That's what will be determined by the 
ongoing investigation.
    Ms. Schakowsky. What part of this don't you know already? 
What part don't you know already? You know that all those cars 
are exceeding your rules. I don't get it.
    Mr. Grundler. Well, there are many things we don't know. We 
don't know the why, the what, the where, who was responsible.
    Ms. Schakowsky. No, you know the fact of it, though.
    Mr. Grundler. But we know the fact. The fact is that 
Volkswagen designed and installed illegal software on----
    Ms. Schakowsky. And the consequence you know, that they are 
emitting all these extra emissions?
    Mr. Grundler. We have not done that calculation yet, but we 
know that they can be anywhere from 10 to 40 times.
    Ms. Schakowsky. Right.
    Mr. Grundler. We have not done the math to figure out what 
those excess tons are and how we are going to mitigate them.
    Ms. Schakowsky. I yield back.
    Mr. Murphy. The gentlelady yields.
    Right now, Ms. Clarke, you are recognized for 5 minutes.
    Ms. Clarke. Thank you, Mr. Chairman.
    Gentlemen, I would like to pick up on the point just raised 
by my colleague Ms. Schakowsky with respect to the emissions 
testing. New York State is one of those States that requires 
emissions testing. And typically, if your vehicle fails an 
emissions test, you can be fined, right? So, we know that, 
because of the defeat device, most likely those vehicles would 
not be detected?
    Mr. Grundler. Correct.
    Ms. Clarke. However, that doesn't change the fact that 
under normal circumstances these vehicles would not be 
permitted on the road. So, to have your agency say, ``Well, 
because it's not your fault, you can continue to drive,'' 
doesn't it sort of undermine the State's requirement for 
certain emissions levels to be contained? For you to then 
undermine that with the ability for people, notwithstanding the 
fact that it is not their fault, most people, when their 
vehicle has an emissions problem don't recognize it and don't 
typically think it is their fault, either. However, we have to 
remedy it before we can take our vehicles on the road. 
Otherwise, we are fined. We receive stickers, and those 
stickers indicate whether our vehicles are in compliance.
    Here we have these stealth vehicles running around in 
certain jurisdictions that do fail that, that would fail that 
under normal circumstances. How do you reconcile that?
    Mr. Grundler. The fines are a matter of State law.
    Ms. Clarke. Right.
    Mr. Grundler. The way to reconcile that is to identify an 
effective remedy, and once that remedy is fixed, those vehicles 
will pass those State inspections and those owners will not be 
subject to fines.
    Ms. Clarke. The challenge is the fact that this has been 
happening with vehicles since 2009. We have no idea when this 
remedy is going to be cooked up. We don't know whether the 
remedy is going to be hard and fast, something that we can rely 
on. We are hoping, but there is going to be testing. There is 
going to be concerns going forward because of the deception of 
how all of this occurred. I mean, we are talking about software 
here, right?
    Mr. Grundler. That's right.
    Ms. Clarke. How do we reconcile that? And let me ask, in 
addition to that, are we able to determine those States that do 
require--we know California, for instance. There are probably 
other States with emissions testing. How many vehicles, how 
many of the 500,000 vehicles are resident within those States, 
and what the effect or the immediate impact would be to the 
environment of the people that reside in those States? Have we 
been able to get a sense of that?
    Mr. Grundler. That's all going to be determined as a result 
of our investigation. It is knowable where these vehicles are 
registered----
    Ms. Clarke. Yes.
    Mr. Grundler. --and where they reside. It is not knowable 
yet how it is going to be fixed. We want to have the confidence 
that it will be effective, but that will require some time.
    Ms. Clarke. Do you anticipate that you will be hearing from 
States' attorneys general and other concerned entities within 
these States, probably their own environmental protection 
organizations at the State level, to try to get a handle around 
this? Because, you know, there are certain areas where this 
type of emission exacerbates already troubled circumstances for 
individuals who have health compromised. I mean, do we see a 
sense of urgency for really dealing with this?
    Mr. Grundler. We've already heard from both State attorneys 
general and State environmental----
    Ms. Clarke. I'm sure.
    Mr. Grundler. I met with all the State environmental 
directors just this week in New Orleans. The air directors, 
they are concerned. They want to help and they are very 
anxious, as are we, to identify how these excess tons, this 
excess air pollution will be mitigated. And that will all go 
into part of how we are going to resolve this once and for all. 
We want to get to the bottom of it.
    Ms. Clarke. In closing, Mr. Chairman, when you have been 
able to complete your analysis, if you can get to this 
committee a breakdown by State, that would be very helpful. We 
may have seen spikes in public health issues that have been 
exacerbated in some form or fashion based on clusters and where 
these cars reside. And we would like to be able to attribute 
that in some form or fashion to maybe the changes that occurred 
in the atmosphere as a result of maybe a cluster of ownership 
in a particular jurisdiction. I think that is going to be very 
important for us to know.
    Mr. Grundler. I understand, and we will do whatever we can 
to serve the committee's work here.
    Ms. Clarke. Very well.
    I yield back, Mr. Chairman.
    Mr. Murphy. Thank you.
    I just want to add, on top of the questions Ms. Clarke just 
gave, if you gather information with regard to State rules, 
with regard to antitampering laws, fines, and also whether it 
is criminal penalties and other aspects along those lines, we 
would appreciate that, as you are gathering this information 
for us. This would be helpful for the committee.
    I want to say I ask unanimous consent that the contents of 
the documents to be introduced into the record and authorize 
staff to make any appropriate redactions. So, without 
objection, the documents will be entered into the record, and 
any redactions that staff determines are appropriate.
    [The information appears at the conclusion of the hearing.]
    Mr. Murphy. And I want to thank the witnesses for coming 
today. We appreciate your time and your attention in this 
difficult matter, but it is important to us. And thank you for 
the testimony and to the members for their devotion to this 
hearing today.
    The committee rules provide that members have 10 days to 
submit additional questions to the record to the witnesses, and 
we hope you will respond promptly to that.
    With that, this hearing is adjourned.
    [Whereupon, at 2:32 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

                                 [all]