Audi 2015 Annual Report Download - page 228

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GENERAL INFORMATION
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/NOTES ON THE DIESEL ISSUE
On September 18, 2015, the U.S. Environmental Protection
Agency (EPA) publicly announced in a “Notice of Violation” that
irregularities in relation to nitrogen oxide (NOx) emissions had
been detected in emissions tests on certain vehicles with
Volkswagen Group diesel engines. EPA alleged that engine
management software installed in four-cylinder diesel engines
used in certain 2009 to 2015 model year vehicles circumvent-
ed NOx emissions standards under test conditions in order to
comply with homologation requirements. The alleged discrep-
ancies relating to the engine management software described
above affected approximately 2.4 million Audi vehicles world-
wide that were equipped with four-cylinder TDI engines devel-
oped by Volkswagen. Whilst technical measures have been
devised for the European variants of this engine type, the
implementation of which was begun at the start of 2016,
Volkswagen is still in the process of coordinating measures
with U.S. authorities because of the greater technical chal-
lenge resulting from the stricter nitrogen oxide limits.
A provision has been recognized for the technical measures
which need to be carried out. Based on contractual agreements,
the Audi Group is entitled to a corresponding compensation
from Volkswagen AG, meaning that there will be no direct impact
on the Audi result.
Furthermore, the Audi Group is involved in several lawsuits
regarding the affected four-cylinder TDI engines. In a number
of countries, class actions under civil and criminal law have
been launched against several companies of the Volkswagen
Group, including Audi Group companies. Volkswagen AG bears
responsibility for defending these cases and the ensuing conse-
quences. AUDI AG therefore expects no outflow of resources in
this regard.
In November 2015, the U.S. environmental agencies EPA and
CARB announced that certain vehicles with type V6 3.0 TDI
diesel engines developed by Audi contained so-called auxiliary
emission control devices (AECDs) that were not adequately
described in the application process for U.S. type approval. This
affects approximately 113,000 vehicles of model years 2009
through 2016 of the Audi, Volkswagen Passenger Cars and
Porsche brands in the United States and Canada. Following
talks with EPA and CARB, the Audi Group informed the public
on November 23, 2015, that software parameters were being
revised so that the software can be resubmitted for approval in
the United States. The technical solutions will be implemented
as soon as they have been approved by the authorities. A provi-
sion was therefore recognized for technical measures, which
also cover the engines supplied to Volkswagen and Porsche.
The V6 3.0 TDI engines are also included in legal proceedings
in the United States concerning the four-cylinder TDI engines
affected, including:
>class action and individual lawsuits in the USA and Canada;
>civil and administrative investigations by the EPA/CARB and
U.S. Department of Justice (DOJ)/Environment Canada,
including the civil complaint filed by the DOJ, on behalf of
the EPA, on January 4, 2016;
>criminal investigations;
>investigations and litigations by the attorney generals of
various U.S. states;
>other government investigations and inquiries.
Jones Day, the international law firm appointed by Volkswagen AG,
overseen by the Supervisory Board of Volkswagen AG and
assisted by the auditing firm Deloitte is conducting an inde-
pendent investigation concerning the diesel issue at
Volkswagen and Audi. At the time of preparation of the Consol-
idated Financial Statements, the Supervisory Board and Board
of Management have received a verbal initial status report on
the investigation at Audi regarding the V6 3.0 TDI engine issue
and the investigation is continuing.
The incumbent members of the Board of Management of
AUDI AG have declared that prior to their notification by the U.S.
environmental protection agency EPA in November 2015, they
had no knowledge of matters concerning the V6 3.0 TDI
engines that the authorities are now treating as infringe-
ments. With regard to the V6 3.0 TDI engine issue, at the time
of reporting the Board of Management considers that the
investigations have not produced any indications to the contra-
ry. Investigation of the four-cylinder TDI engine issue is being
conducted at Volkswagen AG.
Based on the facts of the diesel issue available to and assessed
by the incumbent Board of Management of AUDI AG at the
time of preparation of the financial statements, relating both
to the four-cylinder TDI engine issue for which Volkswagen AG
is accountable and to the V6 3.0 TDI engines of AUDI AG, as
well as based on the status of discussions with EPA/CARB con-
cerning the V6 3.0 TDI engine, it is the opinion of the Board of
Management of AUDI AG that adequate risk provisioning has
been made in the form of provisions for legal risks, technical
measures and sales measures. The provisions created at AUDI
AG in connection with the development responsibility for the
V6 3.0 TDI engine also cover claims by other brands of the
Volkswagen Group (see Note 32 “Other provisions”).