FRANKFURT — Volkswagen suffered another blow to its reputation on Tuesday after it was barred from receiving European Union research financing over allegations it misused a previous loan to cheat on emissions.
The decision by the publicly owned European Investment Bank at least temporarily deprives Volkswagen of low-cost financing it badly needs for research and development during a period of technological upheaval in the automobile business.
Traditional carmakers are struggling to keep up with upstarts like Tesla to develop electric vehicles capable of driving themselves. Volkswagen’s resources have already been depleted because of the company’s admission in 2015 that it programmed 11 million cars to fool regulators. Penalties and legal settlements in the United States totaled more than $22 billion, and cases in Europe are pending.
The hold on new loans came after the European Anti-Fraud Office, known as OLAF, concluded that Volkswagen misled authorities about how it used €400 million, or $472 million, that was meant to be used to develop engines that would be more fuel efficient and pollute less.
Engineering a Deception: What Led to Volkswagen’s Diesel Scandal
In September 2015, Volkswagen was accused of evading emissions standards in the U.S. The scandal has hit the company hard.
Volkswagen used some of the money to develop the EA 189 diesel engine, according to the European Investment Bank. That was the same engine at the heart of the emissions scandal.
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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.
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.
Follow Jack Ewing on Twitter @JackEwingNYT.
A version of this article appears in print on August 2, 2017, on Page B7 of the New York edition with the headline: VW Loses Research Funding After Cheating on Emissions. Order Reprints| Today's Paper|Subscribe
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It is really weird to think the deceit was intentional and yet now VW is out to prove it is all about the earth with huge goals in the EV sector. You wonder if they ever would have made these announcements about going all in on EV's if they didn't get caught.
https://www.nytimes.com/2017/08/01/busi ... sions.html