Dieselgate: VW to take another $3 bn hit; ex-official held

Volkswagen is taking another $3-billion charge to fix diesel engines in the United States, lifting the total bill for its emissions-test cheating scandal to around $30 billion as the German group struggles to put the two-year-old 'Dieselgate' scandal behind it.

The company said the extra charge is because engines are proving "far more technically complex and time consuming" to adapt.

Separately Munich prosecutors made an arrest in connection with the scandal.

Munich prosecutors have named the person taken into custody as Wolfgang Hatz, former board member at VW unit Porsche. Hatz was head of research and development at Porsche and had held other roles in the VW group, including in engine development at Audi. He was suspended after the diesel emissions test-cheating was exposed, and then left the company.

Last year Porsche said no evidence had been found against him.

According to Bloomberg, Hatz was close to former VW chief executive Martin Winterkorn, who has denied any knowledge of the "defeat devices" which allowed vehicles to artificially reduce emissions during tests before their existence was exposed publicly.

VW's growing financial woes and Hatz's arrest were also discussed on Friday at a regular meeting of the carmaker's supervisory board, a person familiar with the matter told Reuters.

VW shares fell as much as 3 per cent on Friday, as traders and analysts expressed dismay that the company was still booking charges for Dieselgate.

VW, Europe's biggest automaker, admitted in September 2015 that it had used illegal software to cheat US diesel emissions tests, sparking the biggest business crisis in its 80-year history. Before Friday, it had set aside €22.6 billion ($26.7 billion) to cover costs such as fines and vehicle refits.

Last year, VW agreed with US authorities to spend up to $15.3 billion to buy back or fix up to 475,000 2.0-litre polluting diesel cars.

On Friday, VW said it was setting aside an additional €2.5 billion ($3.0 billion) as hardware fixes for the models were proving tougher than expected and would take significantly longer.

''We have to do more with the hardware,'' a VW spokesman said.

In Europe, where only a software update is required for the 8.5 million affected cars, plus a minor component integration for about 3.7 million 1.6-litre vehicles included in that number, fixes are running smoothly, the spokesman added.

The additional provision will be reflected in third-quarter results due on 27 October, VW said.

VW said in September 2015 that around 11 million vehicles worldwide could be using software capable of cheating emissions tests. Audi, its luxury division, admitted two months later that about 83,000 vehicles with 3.0-litre V6 diesel engines were also fitted with an auxiliary control device deemed illegal in the US.

Separately, Porsche SE, which owns a 30.8-per cent stake in VW and tracks its earnings, said the new provision would also affect its results, but stuck to the wide range for its expected 2017 post-tax profit of €2.1-3.1 billion.