European Bank Cuts Funds to VW Because of Emissions Fraud

European Bank Cuts Funds to VW Because of Emissions Fraud

- in Automotive

The investment bank, which provides loans to companies for research and other uses, said Tuesday that it would not issue any new funds to Volkswagen while it examined what further action to take.

It also issued an unusually harsh critique of Volkswagen management.

“VW is an excellent company,” Werner Hoyer, the president of the European Investment Bank, said in a statement, “but it has not been served well by its top management since the beginning of this affair. The thousands of wonderful people who work for VW must feel betrayed.”

Volkswagen denied wrongdoing. “All funds received by Volkswagen from the European Union were used for the designated purpose,” the company said in its own statement.


How Volkswagen’s ‘Defeat Devices’ Worked

Volkswagen admitted that 11 million of its vehicles were equipped with software that was used to cheat on emissions tests. This is how the technology works and what it now means for vehicle owners.

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Volkswagen has already repaid the €400 million loan, but the European Investment Bank still has €700 million in outstanding loans to the company’s heavy truck divisions, as well as to subsidiaries in Latin America and India.

The bank is an important source of financing for Volkswagen. The company has received €5 billion worldwide since 1990, the bank said. About one-third of the money was designated for technologies to reduce the cars’ environmental impact.

The Anti-Fraud Office found that Volkswagen misled the European Investment Bank about its use of so-called defeat devices, software that caused pollution controls in diesel motors to work properly only when the engine computer detected that an official emissions test was underway.

Volkswagen has pleaded guilty to charges in the United States that it installed defeat devices in nearly 600,000 cars, most of which were equipped with the EA 189 diesel engine.

The Anti-Fraud Office also referred its findings to prosecutors in Braunschweig, Germany, near Volkswagen headquarters in Wolfsburg. Klaus Ziehe, a spokesman for the state attorney’s office, said authorities were reviewing the findings and had not yet decided how to proceed.

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