VW to Return Cash-for-Clunkers Subsidies to Spain

MADRID – Volkswagen backs down from its initial refusal to return government subsidies for purchases of vehicles equipped with software designed to produce misleading emissions-test results.

The German automaker now says it will return subsidies for about 50,000 vehicles received under the cash-for-clunkers scheme called PIVE. Maximum repayment would be about €50 million ($53.2 million) but likely will be one-fifth to one-quarter of that amount.

Volkswagen admitted in September it had installed the so-called defeat software, which improved fuel economy but emitted up to nine times allowable levels of nitrogen oxide (NOx) in nearly a half-million diesel-powered cars sold in the U.S.

The automaker said later that 11 million vehicles sold worldwide used the software, including 683,626 units registered in Spain. Affected were 257,479 VW-brand vehicles; 221,783 brands from VW’s Spain-based SEAT subsidiary; Audi, 147,095; Skoda, 37,082; and VW Commercial Vehicles, 20,187.

Volkswagen rejected the Spanish government’s request that it give back the PIVE subsidies it had received, contending the payments had been granted based not on NOx but on carbon-dioxide emissions; the program, which has been renewed seven times, is designed to get older vehicles off the road and replace them with newer models with lower CO2 emissions.

But VW admitted Nov. 3 it had understated CO2 emissions by some 800,000 vehicles sold mainly in Europe. Javier García-Sanz, VW Group global vice president-purchasing, went to Spain to inform Minister of Industry Jose Soria that about 50,000 of those 800,000 vehicles likely were registered in Spain.

García-Sanz told Soria VW was committed to return all the subsidies it received for vehicles registered under PIVE. The most recent versions of the program offered subsidies of €2,000 ($2,130) per vehicle, half coming from the government and half from VW Group’s various brands and their dealers.

According to ANFAC, the main Spanish association of automakers, between 20% and 25% of cars registered in Spain in 2015 were purchased with PIVE subsidies. Based on VW’s estimate 50,000 vehicles emitting excessive CO2 levels were registered in Spain, the automaker would pay back between €10 million-€15 million ($10.7 million-$16 million).

VW, Not Spain, Determining Payback Amount

The Spanish government is awaiting for VW to determine which of the 50,000 vehicles emitted more CO2 than reported and how many were subsidized under PIVE, surprising industrial analysts who believe the government itself should do that work.

(VW said last week its estimate of 800,000 vehicles with excessive CO2 emissions was low. It did not provide a revised number, but the vehicles affected include Spanish-built SEAT Ibiza models with 1.0L gasoline engines.)

During his meeting with Soria, Garcia-Sanz reiterated VW’s commitment to uphold its 5-year, €4.2 billion ($4.5 billion) Spanish investment plan through 2019. The automaker, however, has targeted SEAT for €200 million ($213 million) in cost cuts so it can proceed with plans to launch four new models built at SEAT’s Martorell plant next year and in 2017.

SEAT showed an operating profit of €12 million ($12.8 million) through the first nine months of 2015 but is expected to lose money over the course of the 2015 fiscal year.