VOLKSWAGEN GROUP UNITED KINGDOM LTD

Louise Ellman MP Chair of the Transport Committee Transport Committee 01908 601789 House of Commons 01908 601295 2nd Floor paulwillisvwgcouk 14 Tothill Street London SW1H 9NB

21 December 2015

Dear Ms Ellman

Response to the Transport Committee Questions

I write further to your letter dated 7 December 2015 and also my letter dated 1 O December 2015

I have enclosed responses to the further questions that you have posed

I very much hope that the Committee welcomed the news announced in respect of the potential C02 issue as relayed in my letter dated 10 December We are aware that as a result of those announcements circumstances have somewhat overtaken the questions that you asked in advance of that statement Nonetheless we have sought to answer your questions 8(A) to (I) as best we are able given how much the situation has changed

In relation to the NOx issue as I previously informed you information has now been published regarding the findings of the Volkswagens Groups audit function in relation to how these issues arose (please see the enclosed press release of 10 December enclosed again for ease of reference) I am informed that measures in respect of internal compliance structures are already being implemented in order to address those findings

In addition the German federal motor and transport authority (KraftfahrtshyBundesamt the KBA) has now confirmed the technical measures that were presented to them by the Volkswagen Group The Groups focus will now turn to ensuring that those confirmed measures do not have negative impacts upon the vehicles performance when they are implemented Genuine progress is clearly being made which is excellent news for Volkswagens customers in the UK

her details in relation to those issues and on the other issues about which sked are detailed in the enclosed responses

You sincerely

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RESPONSE TO TRANSPORT COMMITTEE QUESTIONS

1 PLEASE COULD YOU PROVIDE VOLKSWAGEN GROUPS POSITION ON WHAT

THE SOFTWARE WAS DESIGNED TO DO AND WHY THERE [IS] A DISPUTE OVER

WHETHER OR NOT IT CONSTITUTES A DEFEAT DEVICE AS DEFINED BY REGULATION

7152007EC

11 We accept that software was fitted that enabled the vehicle to recognise that it was undergoing testing and which changed the NOx emission characteristics in that testing We sincerely apologise for that

12 Detailed investigations into what the software was designed to do and why are however still continuing Approximately 450 external and internal individuals are involved in those ongoing investigations with Jones Days investigation being expected to continue well into next year As we previously infonned the Committee Jones Day have a very significant amount of information to review At present 102 terabytes of information has been secured (approximately equivalent to the amount of information contained in 50 million books) with more than 1500 electronic data storage units (laptops tablets etc) having been secured from approximately 380 employees Clearly it is very imp01iant to establish what happened and why

13 Volkswagen accepts that a defeat device was used in the USA in certain models in the context of the ve1y different regulatory framework and factual circumstances there However we do not think that it is possible to make the same definitive legal dete1mination in relation to the software that was fitted to those differently configured vehicles in the UK and the EU Given that there is the potential for this to be an issue that is examined in litigation both in the English comis and elsewhere and fmiher given that Volkswagen is not taking this point to delay or withhold implementing any of the technical measures as soon as possible regrettably we are unable to provide any fmiher (potentially legally privileged) details in relation to our legal views on this issue

14 Our number one priority is directing our efforts toward developing appropriate technical measures and making sure that they can be implemented in the affected vehicles as quickly as possible whilst causing minimum inconvenience to ommiddot customers irrespective of how the software is classified We are not using the issue of whether or not the software amounted to a defeat device as a means of delaying taking the appropriate action All of the affected vehicles will have the technical measuresmiddot implemented

2 WITHOUT THE DEFEAT DEVICE SOFTWARE WOULD THE VEHICLES MEET

THE EUROPEAN TYPE APPROVAL LEGAL LIMITS ON NOx

21 As above in answering this question we refer to ommiddot response to question one above

22 In very simple terms the software did amend the NOx characteristics in testing The vehicles did meet EU5 standards so it clearly contributed to meeting the EU5 standards in testing

23 Volkswagen obtained type approval for all of its vehicles in the EU and these type approvals remain valid However if Volkswagen had not implemented this pmticular software programme it would have had to substitute it for another programme as it is necessary to recognise that the vehicle is in testing ( as is common across the industry) It would then in turn have to have met the EU5 standards necessary for it to be sold Ifyou simply deleted this particular software programme (without amending anything else) the vehicle would not function Therefore this question is not capable of being answered in the way that is asked

24 Following the implementation of the technical measures which will be approved by the relevant authorities we can confinn that the affected vehicles will meet the European type approval legal limits on NOx in laboratory testing The affected vehicles will be capable of complying with the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities

3 FOR WHAT PURPOSE ARE YOU REMOVING SOFTWARE FROM AFFECTED

VEHICLES

31 We recognise that we let our customers down and that the use of the software in such a manner to affect the NOx emissions characteristics in testing was inappropriate and not what our customers or regulators would expect We want to implement the technical measures to remove any question or concern over how the vehicles met the EU5 testing standard for NOx emissions In any event notwithstanding our approach the KBA is of the view that the operation of the software fits the legal definition of a defeat device and has required us to implement technical measures as a consequence

32 The technical measures which will include updating the software on all three EA 189 engines of the size affected will ensure that the vehicles meet the legal testing limits for NOx in laboratory testing Those updates will only be implemented once they have been finally approved by the relevant regulatory authorities

33 At the same time the technical measures allow the Volkswagen Group to introduce and take advantage of the benefits of all of the subsequent advances in diesel engine technology and indeed in advances in NOx emissions testing developed since these affected older models were originally produced Since that time there have been considerable advances in the technology and learning concerning after treatment systems and how to optimise their operation controlled legitimately by the engine software Volkswagen will be able to introduce this improved technology and learning into the 12 million affected vehicles This will likely improve NOx levels We also refer you to the responses provided to the Environmental Audit Committee on 8 December 2015 (enclosed) for ftuther information in that regard

4 PLEASE PROVIDE THE COMMITTEE WITH THE LATEST INFORMATION ON THE

TECHNICAL FIX FOR EA189 ENGINES

41 We can confam that installation of the technical measures will

(a) be carried out free of charge

(b) take less than one hour (and for the l2L and 20L engines approximately 30 minutes) That timing includes the l6L engines which require the installation of additional hardware (a flow transformer) as well as a software update

(c) statt to be implemented in early 2016

(d) seek to encourage customer uptake by being capable of being scheduled as part of the owners annual Volkswagen service or as a separate service ( at the customers discretion)

42 As we previously informed the Committee the technical measures for the l 2L and 20L engines will be a software update For the l 6L engines a software update will take place in conjunction with the installation of new hardware in the form of a flow transformer That flow transformer will be fitted directly in front of the air mass sensor on the engine In very simple tetms a flow transformer is a mesh that calms the swirled air flow in front of the engines air mass sensor thereby improving the measuring accuracy of the air mass sensor The air mass sensor determines the cmTent air mass throughput which is an imp01tant parameter for the engines management in terms of ensuring that an optimum combustion process is occurring

43 We can also confirm that the Volkswagen Group in the UK is looking at a range of options to minimise customer inconvenience Those options are dependent on the specific technical measures implemented but are very likely to include a range of mobility options free of charge where appropriate Further details are also provided in our response to the Environmental Audit Committees questions ( enclosed) as pa1t of our fifth response

44 Customers have been contacted by letter during the week ending 18 December 2015 to update them on these matters

5 FOR EACH AFFECTED VEHICLE MODEL PLEASE EXPLAIN THE IMPACT OF THE

TECHNICAL FIX ON VEHICLE PERFORMANCE AND IN PARTICULAR FUEL ECONOMY

PLEASE ALSO EXPLAIN WHAT TESTING VOLKSWAGEN GROUP HAS DONE TO

DETERMINE THE IMPACT OF THE TECHNICAL FIX

51 Our goal remains that the technical measures implemented in the affected vehicles will not impact vehicle performance or fuel economy This takes some time to develop and you will recall that there are many model variants with different transmissions Each has its own software programme which needs to be reprogrammed and have its own specific measures designed approved and then tested

52 Whilst the KBA has now confumed our proposed technical measures for all three engine types the Volkswagen Group is now working to finalise the technical measures and obtain final approval from the authorities Each individual concept is tested by the Quality Assurance Department through a series of tests which takes six weeks (and ten weeks if there are hardware modifications) The concepts are tested including for C02 emissions and fuel economy values in different conditions and different altitudes It is a comprehensive testing process which is common across the industry

- - - - - - -- - _ ------- ___ - shy

53 Implementation of the technical measures has yet to commence although we are optimistic based on the testing that the performance and fuel economy will not be adversely affected The testing is undertaken in line with the type approval process We will be closely monitoring both metrics when implementation commences to ensure that our anticipation matches the eventual results and we will be transparent about those results

6 WHAT TESTING HAS THE VOLKSWAGEN GROUP UNDERTAKEN TO ENSURE

THAT ALL VEHICLES WHICH HA VE HAD THE FIX APPLIED WOULD PASS A TYPE

APPROVAL TEST

61 In agreement with the KBA a representative sample from the affected vehicles is retested under type approval conditions and under supervision by the KBA as an external independent technical service

62 The affected vehicles will pass the BUS testing standard following implementation of the technical measures in a manner that is fully approved by the relevant regulatory authorities

63 The Volkswagen Group has also sought and is obtaining initial confirmation from the relevant approval authorities in respect of the technical measures As you can imagine the Volkswagen Group and the technical measures in particular have been rightly under considerable scrntiny The KBA has signed off and confomed our designs in respect of the technical measures

7 PLEASE PROVIDE A LIST OF ALL OTHER INVESTIGATIONS BY REGULATORY

AUTHORITIES WORLDWIDE

71 We can confirm that the Volkswagen Group is facing a number of investigations by regulato1y authorities worldwide Whilst we are obviously keen to assist the Committee in answering its questions there is a degree to which the public announcement of investigations is a matter primarily for the authority that is conducting the investigation We will also not necessarily have been provided with information concerning the fact or the status of any investigation being conducted by a regulatory authority

72 That noted our understanding is that investigations have been commenced in Australia Brazil Canada China Denmark France Germany Ireland Italy Lithuania Mexico Poland South Korea Spain Taiwan the UK and the USA amongst others

73 To reiterate for the reasons given in paragraph 71 above it should be noted that the examples provided above should not be regarded as an exhaustive list Of course the Volkswagen Group is committed to working closely with regulatory authorities worldwide In the UK we have been in close contact with the VCA the DVLA and the DVSA as well as with the DIT and BIS

8 I WOULD LIKE YOU TO PROVIDE INFORMATION ON

A) WHEN VOLKSWAGEN GROUP FIRST BECAME AW ARE OF THE UNDERSTATEMENT

81 We refer to the Volkswagen Aktiengesellschaft press release of 9 December (again enclosed for ease of reference) As is clear from that statement we are very pleased to confirm that there has not been an understatement in respect of C02 ( or fuel efficiency) values Almost all of the affected Volkswagen Group brand models do in fact conform to the C02 levels as originally dete1mined Clearly that is extremely positive news

82 That being the case we anticipate that your concerns surrounding when this issue first became known to Volkswagen Aktiengesellschaft will considerably reduce But to answer the question the Volkswagen Group first became aware of potential irregularities in C02 measurements in early November 2015

83 We regret the unce1tainty caused in relation to the C02 issue but you will no doubt understand that the Volkswagen Group was very keen to ensure that any such infonnation was made available to the public and regulators as soon as possible We hope that the very early publication of our concerns as well as our ultimate response go some way toward demonstrating that the Volkswagen Group is committed to clarification and transparency as we go through this difficult period

B) WHICH VEHICLE MODELS ARE AFFECTED

84 We want to be very clear that based on our cunent understanding it is our position that no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the incorrect C02 measurements applied at the type approval stage

85 However as part of our investigations into the potential C02 issues we dete1mined that for the Volkswagen brand there are nine model variants ( only five of which are sold in the UK) where a slight deviation was found such that futther testing is being carried out The variants that are affected are appended to the enclosed press release

86 As is noted in the press release we will be engaging with the appropriate authorities to conduct the relevant measurements for those model variants by Christmas When fmther concrete information becomes available in respect of the measurements for the nine model variants affected we will provide that additional infonnation to our customers and the Transport Select Committee Our view is that this process does not invalidate or conect the previous figure which was accurate for the time that it applied (and indeed it will not have an effect upon consumers real world fuel consumption or C02 emissions figures given that they are governed by an individuals driving style and conditions on the road)

C) WHAT PLANS YOU HAVE TO REIMBURSE NATIONAL FINANCE MINISTRIES FO~ THE

SHORTFALL IN VEHICLE TAXES THAT ARE BASED ON EMISSIONS

87 We believe that this issue of tax reimbursement has largely fallen away as a result of our finding that no unlawful change to the stated fuel consumption and C02 figures has been found to date Our position is that there is therefore no need to retrospectively amend the figures which is what could give rise to a tax liability The C02 measurements for homologation were accurate and in line with the relevant regulations

88 Nonetheless to the extent that any deviations in production have implications in terms of taxes and duties - and it is impmiant for us to be clear that we do not think that they do - it remains our position that any additional taxes and duties properly due as a direct result of the C02 issue should be charged directly to the Volkswagen Group and not to customers

0) WHAT PLANS YOU HA VE TO COMPENSATE OWNERS OF AFFECTED VEHICLES WHO

MIGHT NOW HA VE TO PAY HIGHER VEHICLE TAXES THAN THEY WERE LED TO

BELIEVE

89 At the moment we do not believe that it is necessary to do this We do not believe that any customers will need to pay higher vehicle taxes as a result of any wrongful application of C02 emissions figures As explained above this issue has fallen away given that no unlawful change to the stated fuel consumption and C02 figures has been found to date

E) WHETHER THAT COMPENSATION WILL EXTEND TO OWNERS OF SECOND HAND

VEHICLES IN THE FUTURE

810 We do not believe that it is necessary to do so That is for the reasons explained above

F) THE NUMBER OF VEHICLES AFFECTED IN THE UK EUROPEAN US AND OTHER

MARKETS

811 As stated above (at paragraph 84) of this response no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the inconect C02 measurements applied at the type approval stage

812 However as noted there are cet1ain model variants where a slight deviation was found such that further testing is being canied out in collaboration with the relevant approval authorities Given that that testing is yet to be concluded for all of the brands we are unable to provide you with definitive figures for the number of vehicles that are affected by these nonnal production conformity issues

813 However we can say that we anticipate that the number of vehicles affected will be relatively small For instance for the Volkswagen brand as noted above we anticipate that only five Volkswagen brand model variants sold in the UK will be affected

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

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Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

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court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

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(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

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New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

23 Volkswagen obtained type approval for all of its vehicles in the EU and these type approvals remain valid However if Volkswagen had not implemented this pmticular software programme it would have had to substitute it for another programme as it is necessary to recognise that the vehicle is in testing ( as is common across the industry) It would then in turn have to have met the EU5 standards necessary for it to be sold Ifyou simply deleted this particular software programme (without amending anything else) the vehicle would not function Therefore this question is not capable of being answered in the way that is asked

24 Following the implementation of the technical measures which will be approved by the relevant authorities we can confinn that the affected vehicles will meet the European type approval legal limits on NOx in laboratory testing The affected vehicles will be capable of complying with the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities

3 FOR WHAT PURPOSE ARE YOU REMOVING SOFTWARE FROM AFFECTED

VEHICLES

31 We recognise that we let our customers down and that the use of the software in such a manner to affect the NOx emissions characteristics in testing was inappropriate and not what our customers or regulators would expect We want to implement the technical measures to remove any question or concern over how the vehicles met the EU5 testing standard for NOx emissions In any event notwithstanding our approach the KBA is of the view that the operation of the software fits the legal definition of a defeat device and has required us to implement technical measures as a consequence

32 The technical measures which will include updating the software on all three EA 189 engines of the size affected will ensure that the vehicles meet the legal testing limits for NOx in laboratory testing Those updates will only be implemented once they have been finally approved by the relevant regulatory authorities

33 At the same time the technical measures allow the Volkswagen Group to introduce and take advantage of the benefits of all of the subsequent advances in diesel engine technology and indeed in advances in NOx emissions testing developed since these affected older models were originally produced Since that time there have been considerable advances in the technology and learning concerning after treatment systems and how to optimise their operation controlled legitimately by the engine software Volkswagen will be able to introduce this improved technology and learning into the 12 million affected vehicles This will likely improve NOx levels We also refer you to the responses provided to the Environmental Audit Committee on 8 December 2015 (enclosed) for ftuther information in that regard

4 PLEASE PROVIDE THE COMMITTEE WITH THE LATEST INFORMATION ON THE

TECHNICAL FIX FOR EA189 ENGINES

41 We can confam that installation of the technical measures will

(a) be carried out free of charge

(b) take less than one hour (and for the l2L and 20L engines approximately 30 minutes) That timing includes the l6L engines which require the installation of additional hardware (a flow transformer) as well as a software update

(c) statt to be implemented in early 2016

(d) seek to encourage customer uptake by being capable of being scheduled as part of the owners annual Volkswagen service or as a separate service ( at the customers discretion)

42 As we previously informed the Committee the technical measures for the l 2L and 20L engines will be a software update For the l 6L engines a software update will take place in conjunction with the installation of new hardware in the form of a flow transformer That flow transformer will be fitted directly in front of the air mass sensor on the engine In very simple tetms a flow transformer is a mesh that calms the swirled air flow in front of the engines air mass sensor thereby improving the measuring accuracy of the air mass sensor The air mass sensor determines the cmTent air mass throughput which is an imp01tant parameter for the engines management in terms of ensuring that an optimum combustion process is occurring

43 We can also confirm that the Volkswagen Group in the UK is looking at a range of options to minimise customer inconvenience Those options are dependent on the specific technical measures implemented but are very likely to include a range of mobility options free of charge where appropriate Further details are also provided in our response to the Environmental Audit Committees questions ( enclosed) as pa1t of our fifth response

44 Customers have been contacted by letter during the week ending 18 December 2015 to update them on these matters

5 FOR EACH AFFECTED VEHICLE MODEL PLEASE EXPLAIN THE IMPACT OF THE

TECHNICAL FIX ON VEHICLE PERFORMANCE AND IN PARTICULAR FUEL ECONOMY

PLEASE ALSO EXPLAIN WHAT TESTING VOLKSWAGEN GROUP HAS DONE TO

DETERMINE THE IMPACT OF THE TECHNICAL FIX

51 Our goal remains that the technical measures implemented in the affected vehicles will not impact vehicle performance or fuel economy This takes some time to develop and you will recall that there are many model variants with different transmissions Each has its own software programme which needs to be reprogrammed and have its own specific measures designed approved and then tested

52 Whilst the KBA has now confumed our proposed technical measures for all three engine types the Volkswagen Group is now working to finalise the technical measures and obtain final approval from the authorities Each individual concept is tested by the Quality Assurance Department through a series of tests which takes six weeks (and ten weeks if there are hardware modifications) The concepts are tested including for C02 emissions and fuel economy values in different conditions and different altitudes It is a comprehensive testing process which is common across the industry

- - - - - - -- - _ ------- ___ - shy

53 Implementation of the technical measures has yet to commence although we are optimistic based on the testing that the performance and fuel economy will not be adversely affected The testing is undertaken in line with the type approval process We will be closely monitoring both metrics when implementation commences to ensure that our anticipation matches the eventual results and we will be transparent about those results

6 WHAT TESTING HAS THE VOLKSWAGEN GROUP UNDERTAKEN TO ENSURE

THAT ALL VEHICLES WHICH HA VE HAD THE FIX APPLIED WOULD PASS A TYPE

APPROVAL TEST

61 In agreement with the KBA a representative sample from the affected vehicles is retested under type approval conditions and under supervision by the KBA as an external independent technical service

62 The affected vehicles will pass the BUS testing standard following implementation of the technical measures in a manner that is fully approved by the relevant regulatory authorities

63 The Volkswagen Group has also sought and is obtaining initial confirmation from the relevant approval authorities in respect of the technical measures As you can imagine the Volkswagen Group and the technical measures in particular have been rightly under considerable scrntiny The KBA has signed off and confomed our designs in respect of the technical measures

7 PLEASE PROVIDE A LIST OF ALL OTHER INVESTIGATIONS BY REGULATORY

AUTHORITIES WORLDWIDE

71 We can confirm that the Volkswagen Group is facing a number of investigations by regulato1y authorities worldwide Whilst we are obviously keen to assist the Committee in answering its questions there is a degree to which the public announcement of investigations is a matter primarily for the authority that is conducting the investigation We will also not necessarily have been provided with information concerning the fact or the status of any investigation being conducted by a regulatory authority

72 That noted our understanding is that investigations have been commenced in Australia Brazil Canada China Denmark France Germany Ireland Italy Lithuania Mexico Poland South Korea Spain Taiwan the UK and the USA amongst others

73 To reiterate for the reasons given in paragraph 71 above it should be noted that the examples provided above should not be regarded as an exhaustive list Of course the Volkswagen Group is committed to working closely with regulatory authorities worldwide In the UK we have been in close contact with the VCA the DVLA and the DVSA as well as with the DIT and BIS

8 I WOULD LIKE YOU TO PROVIDE INFORMATION ON

A) WHEN VOLKSWAGEN GROUP FIRST BECAME AW ARE OF THE UNDERSTATEMENT

81 We refer to the Volkswagen Aktiengesellschaft press release of 9 December (again enclosed for ease of reference) As is clear from that statement we are very pleased to confirm that there has not been an understatement in respect of C02 ( or fuel efficiency) values Almost all of the affected Volkswagen Group brand models do in fact conform to the C02 levels as originally dete1mined Clearly that is extremely positive news

82 That being the case we anticipate that your concerns surrounding when this issue first became known to Volkswagen Aktiengesellschaft will considerably reduce But to answer the question the Volkswagen Group first became aware of potential irregularities in C02 measurements in early November 2015

83 We regret the unce1tainty caused in relation to the C02 issue but you will no doubt understand that the Volkswagen Group was very keen to ensure that any such infonnation was made available to the public and regulators as soon as possible We hope that the very early publication of our concerns as well as our ultimate response go some way toward demonstrating that the Volkswagen Group is committed to clarification and transparency as we go through this difficult period

B) WHICH VEHICLE MODELS ARE AFFECTED

84 We want to be very clear that based on our cunent understanding it is our position that no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the incorrect C02 measurements applied at the type approval stage

85 However as part of our investigations into the potential C02 issues we dete1mined that for the Volkswagen brand there are nine model variants ( only five of which are sold in the UK) where a slight deviation was found such that futther testing is being carried out The variants that are affected are appended to the enclosed press release

86 As is noted in the press release we will be engaging with the appropriate authorities to conduct the relevant measurements for those model variants by Christmas When fmther concrete information becomes available in respect of the measurements for the nine model variants affected we will provide that additional infonnation to our customers and the Transport Select Committee Our view is that this process does not invalidate or conect the previous figure which was accurate for the time that it applied (and indeed it will not have an effect upon consumers real world fuel consumption or C02 emissions figures given that they are governed by an individuals driving style and conditions on the road)

C) WHAT PLANS YOU HAVE TO REIMBURSE NATIONAL FINANCE MINISTRIES FO~ THE

SHORTFALL IN VEHICLE TAXES THAT ARE BASED ON EMISSIONS

87 We believe that this issue of tax reimbursement has largely fallen away as a result of our finding that no unlawful change to the stated fuel consumption and C02 figures has been found to date Our position is that there is therefore no need to retrospectively amend the figures which is what could give rise to a tax liability The C02 measurements for homologation were accurate and in line with the relevant regulations

88 Nonetheless to the extent that any deviations in production have implications in terms of taxes and duties - and it is impmiant for us to be clear that we do not think that they do - it remains our position that any additional taxes and duties properly due as a direct result of the C02 issue should be charged directly to the Volkswagen Group and not to customers

0) WHAT PLANS YOU HA VE TO COMPENSATE OWNERS OF AFFECTED VEHICLES WHO

MIGHT NOW HA VE TO PAY HIGHER VEHICLE TAXES THAN THEY WERE LED TO

BELIEVE

89 At the moment we do not believe that it is necessary to do this We do not believe that any customers will need to pay higher vehicle taxes as a result of any wrongful application of C02 emissions figures As explained above this issue has fallen away given that no unlawful change to the stated fuel consumption and C02 figures has been found to date

E) WHETHER THAT COMPENSATION WILL EXTEND TO OWNERS OF SECOND HAND

VEHICLES IN THE FUTURE

810 We do not believe that it is necessary to do so That is for the reasons explained above

F) THE NUMBER OF VEHICLES AFFECTED IN THE UK EUROPEAN US AND OTHER

MARKETS

811 As stated above (at paragraph 84) of this response no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the inconect C02 measurements applied at the type approval stage

812 However as noted there are cet1ain model variants where a slight deviation was found such that further testing is being canied out in collaboration with the relevant approval authorities Given that that testing is yet to be concluded for all of the brands we are unable to provide you with definitive figures for the number of vehicles that are affected by these nonnal production conformity issues

813 However we can say that we anticipate that the number of vehicles affected will be relatively small For instance for the Volkswagen brand as noted above we anticipate that only five Volkswagen brand model variants sold in the UK will be affected

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

(b) take less than one hour (and for the l2L and 20L engines approximately 30 minutes) That timing includes the l6L engines which require the installation of additional hardware (a flow transformer) as well as a software update

(c) statt to be implemented in early 2016

(d) seek to encourage customer uptake by being capable of being scheduled as part of the owners annual Volkswagen service or as a separate service ( at the customers discretion)

42 As we previously informed the Committee the technical measures for the l 2L and 20L engines will be a software update For the l 6L engines a software update will take place in conjunction with the installation of new hardware in the form of a flow transformer That flow transformer will be fitted directly in front of the air mass sensor on the engine In very simple tetms a flow transformer is a mesh that calms the swirled air flow in front of the engines air mass sensor thereby improving the measuring accuracy of the air mass sensor The air mass sensor determines the cmTent air mass throughput which is an imp01tant parameter for the engines management in terms of ensuring that an optimum combustion process is occurring

43 We can also confirm that the Volkswagen Group in the UK is looking at a range of options to minimise customer inconvenience Those options are dependent on the specific technical measures implemented but are very likely to include a range of mobility options free of charge where appropriate Further details are also provided in our response to the Environmental Audit Committees questions ( enclosed) as pa1t of our fifth response

44 Customers have been contacted by letter during the week ending 18 December 2015 to update them on these matters

5 FOR EACH AFFECTED VEHICLE MODEL PLEASE EXPLAIN THE IMPACT OF THE

TECHNICAL FIX ON VEHICLE PERFORMANCE AND IN PARTICULAR FUEL ECONOMY

PLEASE ALSO EXPLAIN WHAT TESTING VOLKSWAGEN GROUP HAS DONE TO

DETERMINE THE IMPACT OF THE TECHNICAL FIX

51 Our goal remains that the technical measures implemented in the affected vehicles will not impact vehicle performance or fuel economy This takes some time to develop and you will recall that there are many model variants with different transmissions Each has its own software programme which needs to be reprogrammed and have its own specific measures designed approved and then tested

52 Whilst the KBA has now confumed our proposed technical measures for all three engine types the Volkswagen Group is now working to finalise the technical measures and obtain final approval from the authorities Each individual concept is tested by the Quality Assurance Department through a series of tests which takes six weeks (and ten weeks if there are hardware modifications) The concepts are tested including for C02 emissions and fuel economy values in different conditions and different altitudes It is a comprehensive testing process which is common across the industry

- - - - - - -- - _ ------- ___ - shy

53 Implementation of the technical measures has yet to commence although we are optimistic based on the testing that the performance and fuel economy will not be adversely affected The testing is undertaken in line with the type approval process We will be closely monitoring both metrics when implementation commences to ensure that our anticipation matches the eventual results and we will be transparent about those results

6 WHAT TESTING HAS THE VOLKSWAGEN GROUP UNDERTAKEN TO ENSURE

THAT ALL VEHICLES WHICH HA VE HAD THE FIX APPLIED WOULD PASS A TYPE

APPROVAL TEST

61 In agreement with the KBA a representative sample from the affected vehicles is retested under type approval conditions and under supervision by the KBA as an external independent technical service

62 The affected vehicles will pass the BUS testing standard following implementation of the technical measures in a manner that is fully approved by the relevant regulatory authorities

63 The Volkswagen Group has also sought and is obtaining initial confirmation from the relevant approval authorities in respect of the technical measures As you can imagine the Volkswagen Group and the technical measures in particular have been rightly under considerable scrntiny The KBA has signed off and confomed our designs in respect of the technical measures

7 PLEASE PROVIDE A LIST OF ALL OTHER INVESTIGATIONS BY REGULATORY

AUTHORITIES WORLDWIDE

71 We can confirm that the Volkswagen Group is facing a number of investigations by regulato1y authorities worldwide Whilst we are obviously keen to assist the Committee in answering its questions there is a degree to which the public announcement of investigations is a matter primarily for the authority that is conducting the investigation We will also not necessarily have been provided with information concerning the fact or the status of any investigation being conducted by a regulatory authority

72 That noted our understanding is that investigations have been commenced in Australia Brazil Canada China Denmark France Germany Ireland Italy Lithuania Mexico Poland South Korea Spain Taiwan the UK and the USA amongst others

73 To reiterate for the reasons given in paragraph 71 above it should be noted that the examples provided above should not be regarded as an exhaustive list Of course the Volkswagen Group is committed to working closely with regulatory authorities worldwide In the UK we have been in close contact with the VCA the DVLA and the DVSA as well as with the DIT and BIS

8 I WOULD LIKE YOU TO PROVIDE INFORMATION ON

A) WHEN VOLKSWAGEN GROUP FIRST BECAME AW ARE OF THE UNDERSTATEMENT

81 We refer to the Volkswagen Aktiengesellschaft press release of 9 December (again enclosed for ease of reference) As is clear from that statement we are very pleased to confirm that there has not been an understatement in respect of C02 ( or fuel efficiency) values Almost all of the affected Volkswagen Group brand models do in fact conform to the C02 levels as originally dete1mined Clearly that is extremely positive news

82 That being the case we anticipate that your concerns surrounding when this issue first became known to Volkswagen Aktiengesellschaft will considerably reduce But to answer the question the Volkswagen Group first became aware of potential irregularities in C02 measurements in early November 2015

83 We regret the unce1tainty caused in relation to the C02 issue but you will no doubt understand that the Volkswagen Group was very keen to ensure that any such infonnation was made available to the public and regulators as soon as possible We hope that the very early publication of our concerns as well as our ultimate response go some way toward demonstrating that the Volkswagen Group is committed to clarification and transparency as we go through this difficult period

B) WHICH VEHICLE MODELS ARE AFFECTED

84 We want to be very clear that based on our cunent understanding it is our position that no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the incorrect C02 measurements applied at the type approval stage

85 However as part of our investigations into the potential C02 issues we dete1mined that for the Volkswagen brand there are nine model variants ( only five of which are sold in the UK) where a slight deviation was found such that futther testing is being carried out The variants that are affected are appended to the enclosed press release

86 As is noted in the press release we will be engaging with the appropriate authorities to conduct the relevant measurements for those model variants by Christmas When fmther concrete information becomes available in respect of the measurements for the nine model variants affected we will provide that additional infonnation to our customers and the Transport Select Committee Our view is that this process does not invalidate or conect the previous figure which was accurate for the time that it applied (and indeed it will not have an effect upon consumers real world fuel consumption or C02 emissions figures given that they are governed by an individuals driving style and conditions on the road)

C) WHAT PLANS YOU HAVE TO REIMBURSE NATIONAL FINANCE MINISTRIES FO~ THE

SHORTFALL IN VEHICLE TAXES THAT ARE BASED ON EMISSIONS

87 We believe that this issue of tax reimbursement has largely fallen away as a result of our finding that no unlawful change to the stated fuel consumption and C02 figures has been found to date Our position is that there is therefore no need to retrospectively amend the figures which is what could give rise to a tax liability The C02 measurements for homologation were accurate and in line with the relevant regulations

88 Nonetheless to the extent that any deviations in production have implications in terms of taxes and duties - and it is impmiant for us to be clear that we do not think that they do - it remains our position that any additional taxes and duties properly due as a direct result of the C02 issue should be charged directly to the Volkswagen Group and not to customers

0) WHAT PLANS YOU HA VE TO COMPENSATE OWNERS OF AFFECTED VEHICLES WHO

MIGHT NOW HA VE TO PAY HIGHER VEHICLE TAXES THAN THEY WERE LED TO

BELIEVE

89 At the moment we do not believe that it is necessary to do this We do not believe that any customers will need to pay higher vehicle taxes as a result of any wrongful application of C02 emissions figures As explained above this issue has fallen away given that no unlawful change to the stated fuel consumption and C02 figures has been found to date

E) WHETHER THAT COMPENSATION WILL EXTEND TO OWNERS OF SECOND HAND

VEHICLES IN THE FUTURE

810 We do not believe that it is necessary to do so That is for the reasons explained above

F) THE NUMBER OF VEHICLES AFFECTED IN THE UK EUROPEAN US AND OTHER

MARKETS

811 As stated above (at paragraph 84) of this response no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the inconect C02 measurements applied at the type approval stage

812 However as noted there are cet1ain model variants where a slight deviation was found such that further testing is being canied out in collaboration with the relevant approval authorities Given that that testing is yet to be concluded for all of the brands we are unable to provide you with definitive figures for the number of vehicles that are affected by these nonnal production conformity issues

813 However we can say that we anticipate that the number of vehicles affected will be relatively small For instance for the Volkswagen brand as noted above we anticipate that only five Volkswagen brand model variants sold in the UK will be affected

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

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Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

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court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

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(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

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New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

- - - - - - -- - _ ------- ___ - shy

53 Implementation of the technical measures has yet to commence although we are optimistic based on the testing that the performance and fuel economy will not be adversely affected The testing is undertaken in line with the type approval process We will be closely monitoring both metrics when implementation commences to ensure that our anticipation matches the eventual results and we will be transparent about those results

6 WHAT TESTING HAS THE VOLKSWAGEN GROUP UNDERTAKEN TO ENSURE

THAT ALL VEHICLES WHICH HA VE HAD THE FIX APPLIED WOULD PASS A TYPE

APPROVAL TEST

61 In agreement with the KBA a representative sample from the affected vehicles is retested under type approval conditions and under supervision by the KBA as an external independent technical service

62 The affected vehicles will pass the BUS testing standard following implementation of the technical measures in a manner that is fully approved by the relevant regulatory authorities

63 The Volkswagen Group has also sought and is obtaining initial confirmation from the relevant approval authorities in respect of the technical measures As you can imagine the Volkswagen Group and the technical measures in particular have been rightly under considerable scrntiny The KBA has signed off and confomed our designs in respect of the technical measures

7 PLEASE PROVIDE A LIST OF ALL OTHER INVESTIGATIONS BY REGULATORY

AUTHORITIES WORLDWIDE

71 We can confirm that the Volkswagen Group is facing a number of investigations by regulato1y authorities worldwide Whilst we are obviously keen to assist the Committee in answering its questions there is a degree to which the public announcement of investigations is a matter primarily for the authority that is conducting the investigation We will also not necessarily have been provided with information concerning the fact or the status of any investigation being conducted by a regulatory authority

72 That noted our understanding is that investigations have been commenced in Australia Brazil Canada China Denmark France Germany Ireland Italy Lithuania Mexico Poland South Korea Spain Taiwan the UK and the USA amongst others

73 To reiterate for the reasons given in paragraph 71 above it should be noted that the examples provided above should not be regarded as an exhaustive list Of course the Volkswagen Group is committed to working closely with regulatory authorities worldwide In the UK we have been in close contact with the VCA the DVLA and the DVSA as well as with the DIT and BIS

8 I WOULD LIKE YOU TO PROVIDE INFORMATION ON

A) WHEN VOLKSWAGEN GROUP FIRST BECAME AW ARE OF THE UNDERSTATEMENT

81 We refer to the Volkswagen Aktiengesellschaft press release of 9 December (again enclosed for ease of reference) As is clear from that statement we are very pleased to confirm that there has not been an understatement in respect of C02 ( or fuel efficiency) values Almost all of the affected Volkswagen Group brand models do in fact conform to the C02 levels as originally dete1mined Clearly that is extremely positive news

82 That being the case we anticipate that your concerns surrounding when this issue first became known to Volkswagen Aktiengesellschaft will considerably reduce But to answer the question the Volkswagen Group first became aware of potential irregularities in C02 measurements in early November 2015

83 We regret the unce1tainty caused in relation to the C02 issue but you will no doubt understand that the Volkswagen Group was very keen to ensure that any such infonnation was made available to the public and regulators as soon as possible We hope that the very early publication of our concerns as well as our ultimate response go some way toward demonstrating that the Volkswagen Group is committed to clarification and transparency as we go through this difficult period

B) WHICH VEHICLE MODELS ARE AFFECTED

84 We want to be very clear that based on our cunent understanding it is our position that no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the incorrect C02 measurements applied at the type approval stage

85 However as part of our investigations into the potential C02 issues we dete1mined that for the Volkswagen brand there are nine model variants ( only five of which are sold in the UK) where a slight deviation was found such that futther testing is being carried out The variants that are affected are appended to the enclosed press release

86 As is noted in the press release we will be engaging with the appropriate authorities to conduct the relevant measurements for those model variants by Christmas When fmther concrete information becomes available in respect of the measurements for the nine model variants affected we will provide that additional infonnation to our customers and the Transport Select Committee Our view is that this process does not invalidate or conect the previous figure which was accurate for the time that it applied (and indeed it will not have an effect upon consumers real world fuel consumption or C02 emissions figures given that they are governed by an individuals driving style and conditions on the road)

C) WHAT PLANS YOU HAVE TO REIMBURSE NATIONAL FINANCE MINISTRIES FO~ THE

SHORTFALL IN VEHICLE TAXES THAT ARE BASED ON EMISSIONS

87 We believe that this issue of tax reimbursement has largely fallen away as a result of our finding that no unlawful change to the stated fuel consumption and C02 figures has been found to date Our position is that there is therefore no need to retrospectively amend the figures which is what could give rise to a tax liability The C02 measurements for homologation were accurate and in line with the relevant regulations

88 Nonetheless to the extent that any deviations in production have implications in terms of taxes and duties - and it is impmiant for us to be clear that we do not think that they do - it remains our position that any additional taxes and duties properly due as a direct result of the C02 issue should be charged directly to the Volkswagen Group and not to customers

0) WHAT PLANS YOU HA VE TO COMPENSATE OWNERS OF AFFECTED VEHICLES WHO

MIGHT NOW HA VE TO PAY HIGHER VEHICLE TAXES THAN THEY WERE LED TO

BELIEVE

89 At the moment we do not believe that it is necessary to do this We do not believe that any customers will need to pay higher vehicle taxes as a result of any wrongful application of C02 emissions figures As explained above this issue has fallen away given that no unlawful change to the stated fuel consumption and C02 figures has been found to date

E) WHETHER THAT COMPENSATION WILL EXTEND TO OWNERS OF SECOND HAND

VEHICLES IN THE FUTURE

810 We do not believe that it is necessary to do so That is for the reasons explained above

F) THE NUMBER OF VEHICLES AFFECTED IN THE UK EUROPEAN US AND OTHER

MARKETS

811 As stated above (at paragraph 84) of this response no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the inconect C02 measurements applied at the type approval stage

812 However as noted there are cet1ain model variants where a slight deviation was found such that further testing is being canied out in collaboration with the relevant approval authorities Given that that testing is yet to be concluded for all of the brands we are unable to provide you with definitive figures for the number of vehicles that are affected by these nonnal production conformity issues

813 However we can say that we anticipate that the number of vehicles affected will be relatively small For instance for the Volkswagen brand as noted above we anticipate that only five Volkswagen brand model variants sold in the UK will be affected

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

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Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

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(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

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New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

8 I WOULD LIKE YOU TO PROVIDE INFORMATION ON

A) WHEN VOLKSWAGEN GROUP FIRST BECAME AW ARE OF THE UNDERSTATEMENT

81 We refer to the Volkswagen Aktiengesellschaft press release of 9 December (again enclosed for ease of reference) As is clear from that statement we are very pleased to confirm that there has not been an understatement in respect of C02 ( or fuel efficiency) values Almost all of the affected Volkswagen Group brand models do in fact conform to the C02 levels as originally dete1mined Clearly that is extremely positive news

82 That being the case we anticipate that your concerns surrounding when this issue first became known to Volkswagen Aktiengesellschaft will considerably reduce But to answer the question the Volkswagen Group first became aware of potential irregularities in C02 measurements in early November 2015

83 We regret the unce1tainty caused in relation to the C02 issue but you will no doubt understand that the Volkswagen Group was very keen to ensure that any such infonnation was made available to the public and regulators as soon as possible We hope that the very early publication of our concerns as well as our ultimate response go some way toward demonstrating that the Volkswagen Group is committed to clarification and transparency as we go through this difficult period

B) WHICH VEHICLE MODELS ARE AFFECTED

84 We want to be very clear that based on our cunent understanding it is our position that no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the incorrect C02 measurements applied at the type approval stage

85 However as part of our investigations into the potential C02 issues we dete1mined that for the Volkswagen brand there are nine model variants ( only five of which are sold in the UK) where a slight deviation was found such that futther testing is being carried out The variants that are affected are appended to the enclosed press release

86 As is noted in the press release we will be engaging with the appropriate authorities to conduct the relevant measurements for those model variants by Christmas When fmther concrete information becomes available in respect of the measurements for the nine model variants affected we will provide that additional infonnation to our customers and the Transport Select Committee Our view is that this process does not invalidate or conect the previous figure which was accurate for the time that it applied (and indeed it will not have an effect upon consumers real world fuel consumption or C02 emissions figures given that they are governed by an individuals driving style and conditions on the road)

C) WHAT PLANS YOU HAVE TO REIMBURSE NATIONAL FINANCE MINISTRIES FO~ THE

SHORTFALL IN VEHICLE TAXES THAT ARE BASED ON EMISSIONS

87 We believe that this issue of tax reimbursement has largely fallen away as a result of our finding that no unlawful change to the stated fuel consumption and C02 figures has been found to date Our position is that there is therefore no need to retrospectively amend the figures which is what could give rise to a tax liability The C02 measurements for homologation were accurate and in line with the relevant regulations

88 Nonetheless to the extent that any deviations in production have implications in terms of taxes and duties - and it is impmiant for us to be clear that we do not think that they do - it remains our position that any additional taxes and duties properly due as a direct result of the C02 issue should be charged directly to the Volkswagen Group and not to customers

0) WHAT PLANS YOU HA VE TO COMPENSATE OWNERS OF AFFECTED VEHICLES WHO

MIGHT NOW HA VE TO PAY HIGHER VEHICLE TAXES THAN THEY WERE LED TO

BELIEVE

89 At the moment we do not believe that it is necessary to do this We do not believe that any customers will need to pay higher vehicle taxes as a result of any wrongful application of C02 emissions figures As explained above this issue has fallen away given that no unlawful change to the stated fuel consumption and C02 figures has been found to date

E) WHETHER THAT COMPENSATION WILL EXTEND TO OWNERS OF SECOND HAND

VEHICLES IN THE FUTURE

810 We do not believe that it is necessary to do so That is for the reasons explained above

F) THE NUMBER OF VEHICLES AFFECTED IN THE UK EUROPEAN US AND OTHER

MARKETS

811 As stated above (at paragraph 84) of this response no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the inconect C02 measurements applied at the type approval stage

812 However as noted there are cet1ain model variants where a slight deviation was found such that further testing is being canied out in collaboration with the relevant approval authorities Given that that testing is yet to be concluded for all of the brands we are unable to provide you with definitive figures for the number of vehicles that are affected by these nonnal production conformity issues

813 However we can say that we anticipate that the number of vehicles affected will be relatively small For instance for the Volkswagen brand as noted above we anticipate that only five Volkswagen brand model variants sold in the UK will be affected

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

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Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

C) WHAT PLANS YOU HAVE TO REIMBURSE NATIONAL FINANCE MINISTRIES FO~ THE

SHORTFALL IN VEHICLE TAXES THAT ARE BASED ON EMISSIONS

87 We believe that this issue of tax reimbursement has largely fallen away as a result of our finding that no unlawful change to the stated fuel consumption and C02 figures has been found to date Our position is that there is therefore no need to retrospectively amend the figures which is what could give rise to a tax liability The C02 measurements for homologation were accurate and in line with the relevant regulations

88 Nonetheless to the extent that any deviations in production have implications in terms of taxes and duties - and it is impmiant for us to be clear that we do not think that they do - it remains our position that any additional taxes and duties properly due as a direct result of the C02 issue should be charged directly to the Volkswagen Group and not to customers

0) WHAT PLANS YOU HA VE TO COMPENSATE OWNERS OF AFFECTED VEHICLES WHO

MIGHT NOW HA VE TO PAY HIGHER VEHICLE TAXES THAN THEY WERE LED TO

BELIEVE

89 At the moment we do not believe that it is necessary to do this We do not believe that any customers will need to pay higher vehicle taxes as a result of any wrongful application of C02 emissions figures As explained above this issue has fallen away given that no unlawful change to the stated fuel consumption and C02 figures has been found to date

E) WHETHER THAT COMPENSATION WILL EXTEND TO OWNERS OF SECOND HAND

VEHICLES IN THE FUTURE

810 We do not believe that it is necessary to do so That is for the reasons explained above

F) THE NUMBER OF VEHICLES AFFECTED IN THE UK EUROPEAN US AND OTHER

MARKETS

811 As stated above (at paragraph 84) of this response no vehicles have been affected by an understatement of C02 emissions and no vehicles have had the inconect C02 measurements applied at the type approval stage

812 However as noted there are cet1ain model variants where a slight deviation was found such that further testing is being canied out in collaboration with the relevant approval authorities Given that that testing is yet to be concluded for all of the brands we are unable to provide you with definitive figures for the number of vehicles that are affected by these nonnal production conformity issues

813 However we can say that we anticipate that the number of vehicles affected will be relatively small For instance for the Volkswagen brand as noted above we anticipate that only five Volkswagen brand model variants sold in the UK will be affected

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

814 Fmihermore we can say with ce1iainty that the number of vehicles affected is much smaller than the 800000 worldwide figure that was initially reported with the projected worldwide annual sales for the nine Volkswagen brand model variants estimated to amount to only 36000 vehicles

G) THE SIZE OF THE DISCREPANCY BETWEEN THE ADVERTISED C02 EMISSIONS AND

FUEL ECONOMY AND ACTUAL PERFORMANCE

815 As set out above there is no discrepancy for any models to date We can confi1m that certain model variants are to be remeasured as pali of the usual checks relating to production conformity to see if they require amendments to the type approval numbers Those remeasurements - carried out in cooperation with the relevant regulatory authorities - have not yet all been concluded but our anticipation is that any amendments are expected to be very slight

II) VW GROUPS PLANS FOR COMPENSATING VEHICLE OWNERS

816 We do not have any plans to compensate owners in respect of the C02 issue as we do not believe that it is necessary to do so As you know compensation requires a fault which has given rise to some fonn of loss That is for the reasons explained above not the case here

817 We are genuinely sorry for any unce1iainty that our announcement on 3 middot November created

I) PLEASE EXPLAIN THE IMPACT OF UNDERSTATING C02 EMISSIONS ON

VOLKSWAGENS FLEET AVERAGE

818 As explained in response to question 8(A) we have dete1mined that no unlawful change to the stated fuel consumption and C02 figures has been found to date As a result we do not believe that it is true to say that understating of C02 emissions has occmTed To be clear there is no impact to declare

9 PLEASE EXPLAIN VOLKSWAGEN GROUPS FULL REASONING FOR

COMPENSATING VW OWNERS IN THE UNITED STATES AFFECTED BY THE NOX

EMISSIONS SCANDAL BUT NOT VW OWNERS IN EUROPE

91 To be accurate a goodwill payment is not a fo1m of compensation in the sense that it does not affect a consumers right to legally claim fo1 financial compensation

92 To encourage brand loyalty and to generate positive feelings towards the brands in recognition of the recent turbulent times and lack of trust in the Volkswagen Group the Volkswagen Group will be providing a package to consumers tailored to each country and its pa1iicular circumstances This is to seek to encourage loyalty to the brand and to rebuild the trust that has been lost

93 In the UK Volkswagen has been focussing on developing the technical measures as soon as possible We believe that we have developed a technical fix for all of the affected engines As noted above those measures have been confirmed by the KBA and involve either a simple software update (taking around 30 minutes) or a

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

software update and a minor hardware change involving the insertion of a flow transformer which will also take under an hour to complete

94 The technical measures are designed to have no impact on performance and the measures are of such a limited nature that we are very optimistic that that will be the case As we state above the affected vehicles will then be capable of meeting the testing limits for NOx during testing in a manner that is fully approved by the relevant regulatory authorities There may even be benefits in terms of reduced NOx emissions going fo1ward due to the advances in technology and learning since the affected vehicles were produced

95 That being the case in the UK rather than offering a separate financial payment as a goodwill gesture at this stage we think that with the fix just around the comer the sums available for such a goodwill payment should be spent on maximising the uptake of the technical measures among customers and ensuring that it is done with as little inconvenience to them as possible

96 The details are still being finalised (and discussed with the VCA) but the Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the technical solution and include a range of mobility options free of charge where appropriate

97 In the US the Volkswagen customers are in a very different position and hence why Volkswagen has adopted a different solution The most imp01iant differences are

(a) firstly given the different regulations in the US and the different engine configurations it could be the case that most US Volkswagen customers will have to wait considerably longer for the technical measures to be implemented than UK customers At present no technical measure is confirmed by the EPA and there is no timetable laid out for when this will occur as far as we know That goodwill gesture in the US therefore recognises that uncertainty and seeks to encourage loyalty in that group whilst they wait for the technical measures to be developed

(b) secondly the US market - with a diesel market share of roughly 3 percent - is a niche market in terms of its specific situation with regard to diesel technology and cannot be compared with other markets The current diesel issue has led to a sales stop for both new and used vehicles fitted with the affected TDI engines and appears to have had a major impact on customers confidence in this technology which is still at a very early stage For this reason Volkswagen Group of America decided to introduce this goodwill package for existing customers and hope that they see this as a first step towards restoring their invaluable trust

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

VOLKSWAGEN AKTI ENG ESE LL SC HAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iffimicroij IDpecca

Volkswagen making good progress with its investigation technical solutions and Group realignment

bull Initial results of the emissions investigation available bull Approximately 450 external and internal experts involved in the

investigations bull 100 terabytes of data secured - equivalent to information in

approximately 50 million books bull Volkswagen will have future emissions tests evaluated independently bull Technical solutions for customers in Europe developed implementation

to begin in January 2016 bull Group realignment making good progress

Wolfsburg December 10 2015 - The Volkswagen Groups realignment is well underway The Group is making progress on all five of the priorities it set at the end of October The technical solutions for customers in Europe have been devised presented to the authorities and positively evaluated by them These solutions will begin to be implemented in January 2016 The emissions investigation is producing results and initial consequences have already been drawn based on the findings to date The implementation of the new structure is proceeding according to plan and the process of developing a new strategy has commenced The Chairman of the Supervisory Board of Volkswagen AG Hans Dieter Petsch told the press in Wolfs burg today The Volkswagen Group is fully functional in every respect even during these eventful days How and when we meet the current challenges is primarily - although not solely - up to us In order to pass this test we must make an enormous common effort - and we are all ready to do so The Chairman of the Board of Management Matthias Muller said We are doing everything to overcome the current situation but we will not allow the crisis to paralyze us On the contrary we will use it as a catalyst to make the changes Volkswagen needs

For the first time the Company provided detailed commentary on the status of its investigation which is being coordinated by a special committee of the Supervisory Board Approximately 450 internal and external experts are involved in the investigations which are being conducted in two phases An internal review being conducted by a task force of experts from various Group companies with a clearly defined mandate and a deadline is focused on the mandate to Group Audit by the Supervisory Board and the Management Board to investigate relevant processes reporting and monitoring systems and the associated infrastructure Group Audit will provide its findings to the external experts of Jones Day The Supervisory Board has given this internationally respected law firm a parallel mandate to completely clarify the facts and responsibilities - ie among other things it has been asked to conduct a forensic investigation In connection with its work Jones Day is being provided with operational support by the audit firm Deloitte

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Group Audit has identified process weak points

As reported on Wednesday extensive internal investigations which were subject to external independent review did not confirm the suspicion of irregularities during the C02 certification process Now the first significant findings in the investigation of the nitrogen oxide (NOx) issue are available Group Audits examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors

bull The misconduct and shortcomings of individual employees bull Weaknesses in some processes bull A mindset in some areas of the Company that tolerated breaches of rules

It is clear that in the past deficiencies in processes have favored misconduct on the part of individuals This is true for example for test and certification processes affecting our engine control devices which were not suited to preventing use of the software in question Group Audit has suggested specific remedies to correct this We are concentrating on structuring these processes more transparently and systematically For example in the future software for engine control devices will be developed more strictly in accordance with the 4-eyes principle In addition the bodies responsible for the release of such software are being reorganized They will be given more sharply defined and binding powers and responsibilities Deficiencies were also found in reporting and monitoring systems The main problem there was that responsibilities were not sufficiently clear Volkswagen will now further sharpen them Group Audit also found deficiencies in some areas of Volkswagens IT infrastructure These deficiencies will also be remedied Volkswagen will introduce IT systems that allow individual processes to be monitored with greater efficiency and transparency This will simultaneously reduce our dependence on individuals when problematic processes have to be identified and if necessary escalated As Potsch stated Group Audits investigation is producing valuable findings which will help us create a structure that rather than favoring breaches of regulations will prevent them or at least allow them to be detected early on

The Company has already drawn a key conclusion based on Group Audits findings namely that its testing practice must undergo comprehensive changes Volkswagen has decided that in the future emissions test will be evaluated externally and independently In addition randomly selected real-life tests to assess emissions behavior on the road will be introduced Chairman of the Supervisory Board Potsch stated We hope that this will help Volkswagen regain lost trust

More time is required for the external investigation

Although Group Audits analysis of the processes will be concluded shortly Jones Day will need well into next year in order to finish its work The external investigators will need more time for their investigation for two reasons The first is that they have a massive volume of data to screen At present 102 terabytes of information have been secured which is the equivalent of the information contained in approximately 50 million books More than 1500 electronic data storage units have been collected from approximately 380 employees The second reason is that their investigation of the facts takes legal responsibility into account Therefore their findings must not only be plausible and consistent but must also hold up in

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

VOLKSWAGEN AKT[ ENG ESE LLSCHAFT

Page3

court Volkswagen plans to provide a status update on the external investigation at its Annual General Meeting on April 21 2016

The information that has been screened to date has largely explained the origin and development of the nitrogen oxide issue It proves not to have been a one-time error but rather a chain of errors that were allowed to happen The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005 Initially it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested Later when an effective technical process was available to reduce NOx emissions it was not employed to the full extent possible On the contrary the software in question allowed the exhaust gas treatment additive AdBlue to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay but significantly higher when vehicles were on the road

Hans Dieter Piitsch stressed that No business transaction justifies overstepping legal and ethical bounds As a first step nine managers who may have been involved in the manipulations were suspended Potsch emphasized I here and now guarantee that we will pursue our thorough investigation to its conclusion I vouch for this personally as does the entire Supervisory Board of Volkswagen AG

Technical solutions which have been positively evaluated by the German Federal Motor Transport Authority (Kraftfahrtbundesamt) are now available for the European variants of the EA 189 engine type affected Volkswagen is thus ensuring that the models affected in Europe will meet all legal requirements in the future The costs of implementing these solutions will be manageable in technical manufacturing and financial terms The software of the 20 and 12 liter TOI will be updated For the 16 liter TOI a so-called flow transformer will be used that increases the measurement precision and in combination with redesigned software will optimize injection quantity

Now that the technical solutions have been approved Volkswagen is working intensely on plans to implement them The recall of the highest-volume variant the 20 liter TOI will begin in January 2016 The recall of the 12 liter TOI is currently scheduled to begin in the second quarter The implementation phase for the 16 liter models is planned to begin in the third quarter to allow time to prepare for the hardware modification Under the current plan the entire initiative will take at least all of calendar year 2016 Matthias MUiier Chairman of the Board of Management promised Volkswagen will not rest until this matter has been resolved once and for all to our customers satisfaction Volkswagen will inform the owners of the affected vehicles individually as to when their vehicles will be updated Volkswagen guarantees that the solutions will be implemented free of charge The company waives any statute of limitations for the technical solutions and will provide an appropriate replacement vehicle if required

Due to far stricter nitrogen oxide limits in the United states it is a greater technical challenge to retrofit the vehicles such that all applicable emissions limits can be met with one and the same emissions strategy To this end Volkswagen is cooperating closely with the United States Environmental Protection Agency (EPA) and the California Air Resources Board

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

-----u---

VOLKSWAGEN AKTI ENG ESE LLSCHAFT

Page4

(GARB) The solution designed for North America will be presented as soon as it has been approved by the responsible authorities

Implementation of the new Group structure commenced

Parallel to overcoming the crisis Volkswagen is also instituting a comprehensive new alignment that affects the structure of the Group as well as its way of thinking and its strategic goals

Volkswagen will be managed in a more decentralized fashion in the future and its brands and regions will be granted more independence The Groups Board of Management is fully focused on its core task advancing the major global issues for the future as well as synergies controls and strategy Volkswagen will have significant input to the technical changes that have a major impact on its own business model becoming more agile and streamlining its decision-making processes In addition Volkswagen will become leaner and improve cost efficiency All these structural changes ultimately aim to reduce managerial complexity and ensure that the Group can be effectively led over the long term

At an organizational level with the appointment of Dr Christine Hohmann-Dennhardt the Integrity amp Law area will be represented as its own department on the Groups Board of Management in the future - a clear indication that these issues are extremely important to Volkswagen Significantly more importance will be attached to digitalization which will report directly to the Chairman of the Board of Management Overall direct reports will be reduced from more than 30 to 19

The renewal of personnel in the Group has recently again been given new impetus Since the beginning of 2015 the Groups Board of Management has seen six new members join seven of the brands have had their top personnel changed and eight departments falling within the CEOs area of responsibility now have new heads MOiier stated The team with which we wish to address the challenges of the coming months and years is in place The details of the new structure are to be worked out in the first quarter of 2016 The new structure will be in place Group-wide by the start of 2017

New mindset initiated

MOiier noted We can have the best people and a great organization but we can do nothing without the right attitude and mentality During the upcoming process of change toward a new way of thinking Volkswagen can build on its traditional strengths quality consciousness strong identification with its vehicles and a high degree of social responsibility According to MOiier the future will be about more open discussions closer cooperation and a willingness to allow mistakes if they are understood as an opportunity to learn The Chairman of the Board of Management stated We dont need yes-men but managers and engineers who make good arguments in support of their convictions and projects who think and act like entrepreneurs I am calling for people who are curious independent and pioneering People who follow their instincts and are not merely guided by the possible consequences of impending failure In short the future at Volkswagen belongs to the bold We need a little more Silicon Valley coupled with the competence from Wolfsburg lngolstadt stuttgart and the other Group locations

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

VOLKSWAGEN AKTJ ENG ESE LLSCHAFT

Page5

New strategic destination under development

In addition Volkswagen has initiated development of a new strategic target strategy 2025 with which Volkswagen will address the main issues for the future is scheduled to be presented in mid 2016 MOiier explained We are realigning Volkswagen strategically and technologically Our goal is to courageously and decisively participate in shaping the future of mobility Among other things the Group aims to achieve a significant expansion of its sales outside of its current core business Furthermore a digitalization and an electrification offensive are being prepared

In parallel Volkswagen is currently doing everything it can to limit the effect the current situation has on its business performance The operating business is meeting expectations and the 2015 annual forecast which was updated at the end of October remains unchanged The sales figures are very mixed as regards the various markets and brands MOiier explained Overall the situation is not dramatic but as was to be expected its tense

In summary the Chairman of the Board of Management stated Although the current situation is serious this company will not be broken by ii We have a clear mission we will create a new better and stronger Volkswagen A company that uses its strengths to make the transition to the new world of automobiles A company that now releases new forces and takes better advantage of its huge potential And last but not least a company that will be successful over the long term on the basis of strong values

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 61 9 - 2 43 19 wwwvolkswagen-media-servicescom wwwvolkswaqenagcom

Volkswagen Group Communications Head of Group Communications Company and Business Eric Felber Phone +49 (0) 53 61 9 - 8 75 75 E-mail ericfelbervolkswagende wwwvolkswagen-media-servicescom

No 4372015

VOLKSWAGEN GROUP UNIHQ KINPDOM LTD

Mr Huw lrranca-Davies MP Chair of the Environmental Audit Committee 01908 601789 Committee Office 01908 601295 House of Commons paulwlllisvwgcouk 14 Tothlll Street London SW1 H 9NB

7 December 2015

Dear Mr lrranca-Davies

Response to Environmental Audit Committee Questions

Thank you for your letter dated 11 November 2015

I wish to reiterate my thanks for the opportunity to appear before the Environmental Audit Committee on 15 October 2015

As an organisation Volkswagen is absolutely committed to ensuring that its vehicles meet air pollution standards As part of that commitment we fully support the introduction of more representative NOx emissions standards

Since I came before the Committee you will have seen the press statements (attached) made by a senior member of Volkswagen AGs Board of Management Whilst Independent investigations will be ongoing for some lime I wish to make clear to the Committee that the issues relating to the certification process for C02 and fuel consumption values are separate to those relating to NOx emissions

I enclose responses to each of the addilional questions that you set out In your letter I hope that these responses help provide the further clarity sought by the Committee while recognising that precision In some areas will have to wait for the results of further investigations

We fully recognise that we have not met the standards expected of us and once again on behalf of Volkswagen I wish to reiterate my sincere apologies and to stress that we will take the necessary actions to regain the trust of our cust er and the wider public

WjN

Pau Willis~~ Mana g Dlrec Volkswagen roup UK Limited

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RESPONSE TO ENVIRONMENT AL AUDIT COMMITTEE QUESTIONS

WE UNDERSTAND THAT EACH MODEL IS DIFFERENT AND THAT THERE ARE

DIFFERENCES IN WHAT COULD DE CONSIDERED REAL WORLD DRIVES SO PLEASE

USE AVERAGE OR TPICAL VALUES

The Volkswagen Group does not possess data that could reliably be considered to be average or typical values for real world driving in the UK Given the lack of consensus as to what an average UK drive is such values for real world driving simply do not exist

Whilst you may be sceptical as to why VW Group does not possess such data please bear in mind that if Volkswagen were to independently develop such average or typical values we would hesitant to publicise such values given the lack of comparability of such values with other manufacturers vehicles and the consequentmiddot potential for this data to cause confusion amongst the public

WITH REGARD TO THE DIFFERENCE BETWEEN THE LEVEL OF NOX EMISSIONS

RECORDED FROM A VV VEHICLE WITH A DEFEAT DEVICE FITTED AND ONE

WITHOUT

1 IF VOLKSWAGEN HAD PROGRAMMED THE SOFTWARE TO ENSURE THE LEGAL

LIMIT WAS MET IN THE REAL WORLD AS WELL AS THE LABORATORY HOW MUCH

NOX EMISSION PER CAR ON AVERAGE WOULD HAVE DEEN SAVED

11 In answering these questions we note that whilst the issue of whether or not a defeat device was used is still to be determined Volkswagen accepts that software was used in type EA 189 diesel engines that optimises NOx emissions during the emissions tests

12 We must be very clear that there is presently neither a legal real world testing limit for NOx on the road nor an accepted comparable method of testing for those real world NOx emissions on the road Instead there is only a limit for NOx in the laboratory using standardised testing methods (see for example 2008C 18208 Paragraph 10) The cunent legal method of testing for NOx emissions in the laboratory is widely recognised to be out-dated and not reflective of real world driving

13 As there is no legal limit for N Ox emissions in the real world it is impossible for the Volkswagen Group to meet it Given the impossibility ofprograming software to meet that undefined limit it is also impossible for us to quantify the amount of NOx emissions that would have been saved per vehicle

14 At the moment the UKs regulatory regime does not require the motor vehicle industry to manufactme vehicles that comply with the NOx testing limits when they are driven on the road

2 WHAT WILL THE COMPANY DO TO THE SOFTWARE WHEN YOU RECALL THE

AFFECTED CARS AND HOW MUCH LESS WILL THEIR NOX EMISSIONS BE COMPARED

WITH THE LEVELS BEFORE RECALL

21 NOx emissions in the real world (to which this question presumably relates) are not based on emissions produced in the testing regime instead they are dependent upon the way vehicles are individually driven on the road Individual driving styles and conditions determine real world emissions and are often outside the parameters of the laboratory testing standards

22 As pati of the service action that the Volkswagen Group has proposed to the relevant approval authorities all of the affected vehicles will have their software updated That update will only happen once it has been approved by the authorities

23 The result of that software being updated will be that the affected vehicles are capable ofcomplying with the testing limits for NOx during testing in a manner that is fillly approved by the relevant regulatory authorities

24 To do this the Volkswagen Group will undeliake technical measures in 2016 and will be able to introduce and take advantage of the benefits of all of the su)sequent advances in diesel engine technology and indeed in advances in NOx emissions testing (based on subsequently developed drive cycles albeit none ofwhich are typical of average driving in the UK) developed since these older models were originally produced Since that time there have been considerable advances in the technology and learning concerning after treatment systems and how to optimise their operation controlled legitimately by the engine software

25 In introducing this improved technology and learning into the older models the Volkswagen Group believes that the affected vehicles real world NOx emissions are likely to decrease as compared to levels that the original car would have produced in similar conditions (bearing in mind that there has never been an approved real world drive cycle to allow such a comparison to be made with certainty) This would be similarly the case if the Volkswagen Group introduced improved diesel technology and learning into unaffected models from the years 2007-2012 That is any reduction in real world NOx et111ssions here is only caused by the introduction of the more modern engine teclmology and learning via the technical measures

26 This leads to a related issue raised during the session on 15 October 2015 namely how much more NOx has been emitted by the affected vehicles in the real world than would have been the case had the affected vehicles not had NOx emission testing issues To be clear that question is different to Q2 above which considers the future emissions after the technical measures being implemented

27 It would obviously be preferable to be able to answer this question based on objective data or measurements based on agreed standardised systems However when the affected vehicles were originally tested for NOx emissions limits the only relevant test was the laboratory dynometer bench test There was no real world drive testing required and no reliable acceptable way of conducting such tests All of the affected vehicles complied with the EU5 emissions limits as measured in the laboratory bench test

28 Ifa driver drove the affected vehicle exactly like the ce11ification cycle NEDC he or she would achieve the same emissions as achieved in the laborato1y during emissions testing But it is highly unlikely that vehicles would have been driven on UK roads in a manner similar to the laboratory bench testing It is therefore the case that the emissions in the real world in the UK from those vehicles would have been higher than those measured in the laboratory This would have been the case for all manufacturers vehicles

29 In summary the testing software does not influence NOx emissions on those vehicles when driven in the real world Instead it is the driving style or cycle or conditions of driving that actually influences the NOx emissions

3 AFTER VOLKSWAGEN HAS CHANGED THE SOFTWARE FOLLOWING RECALL

HOW llUCH DIFFERENT FROM THE REGULATORY LIMIT WILL THE REAL WORLD

EMISSIONS BE AND WHY SHOULD THEY BE DIFFERENT AT ALL

31 As we have noted above given that there is no consensus on what amounts to real world driving in the UK we are unable to quantify the difference between the regulatory NOx limit during testing and the actual real world NOx emissions on the road

32 However ilrnspective of any software that is updated as pait of the proposed service action it must be recognised that the current regulatory regime and the present technology available to all manufacturers means that in practice there will be a difference between a vehicles NOx emissions during testing and emissions on the road when driven in a different manner The extent of that difference will depend upon precisely how the car is individually driven and the conditions under which it is driven We anticipate that those differences will remain after the approved software is updated as would be the case for all manufacturers vehicles

33 As stated above if you have a regulatory regime that is not related to real world driving (and no regulatory regime can be reflective of all driving in all circumstances) then there will be a difference between real world emissions and regulatory emissions in testing

34 The current regulatory testing regime has deficiencies that are widely known both inside and outside of the motor vehicle industry For that reason we support moves toward a more appropriate testing regime that better reflects real world driving

-----------------middot-middot- ---~

4 V OLKSV AGEN UK HAS STOPPED SELLING NEW CARS WHICH COULD HAVE

DEFEAT DEVICES HAVE YOU ALSO STOPPED POTENTIALLY AFFECTED MODELS

BEING SOLD THROUGH YOUR USED CAR PROGRAMME DAS WELTAUTO

41 Volkswagen has not halted sales of used vehicles that have the potential to be affected by the NOx issue via the Das WeltAuto programme We have taken this decision because

(a) those vehicles remain teclmically safe and roadwo1thy and are already legally on the road

(b) all of the affected vehicles will be subject to the approved technical meas mes in the near future

(c) any customer that is considering purchasing one of the affected vehicles will be notified of that fact as well as the necessity of the implementation of a technical measures before they purchase the vehicle in question

5 WILL VOLKSWAGEN UK OFFER ANY INCENTIVES TO CUSTOMERS IMPACTED

BY THE ISSUE TO UNDERTAKE A FIX THAT MIGHT IMPACT THEIR CARS

PERFORMANCE

51 Om intention remains that the implementation of the technical measures will not affect the vehicles performance Once it has been confirmed that performance will not be affected this will be widely publicised so as to ensure that customers are encouraged to adopt the implementation of the technical measures The work that is undertaken in relation to that fix will be carried out free ofcharge

52 In line with the DVSAs Guidelines the Volkswagen Group will not offer an incentive to customers to encourage them to implement the technical measmes In the event that the implementation of the teclmical measmes is lower than hoped this can be reviewed with the DVSA

53 We can also confirm that our anticipation is that the timing for implementation of the technical measures for all of the affected vehicles is expected to be less than one hour As a result and so as to minimise inconvenience our anticipation is that the technical measures can be implemented as part of owners usual service which has traditionally encouraged high take up or by making a shmt visit to an authorised retailer The Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the teclmical solution and include a range ofmobility options free of charge where appropriate

6 You WILL BE AWARE OF THE RECENT DECISION BY THE EU TECHNICAL

COMMITTEE ON MOTOR VEHICLES TO SIGNIFICANTLY INCREASE THE PERMITTED LEVELS OF NOX EMISSIONS FROM EURO 6 VEHICLES AND DELAY THE

IMPLEMENTATION OF THE LIMITS FOR ALL NEW CARS UNTIL 2019 DOES VOLKSWAGEN UK SUPPORT THAT DECISION

61 Yes the Volkswagen Group supp01ts the decision of the EU Technical Committee of Motor Vehicles (TCMV) as supported by the British Government and the introduction of a more modern real driving emissions (RDE) testing regime The legislation is due to be implemented in 2016 with a monitoring phase Limits will apply from September 2017

62 RDE and the conformity factor applicable from 2020 of I plus a margin for error of 05 represents a major challenge for the industry Up until now the indushy was legally required to meet the limits under NEDC The timeline boundary conditions and conformity factors agreed by TCMV are extremely challenging for the industty

7 CAN YOU CONFIRM THAT VW HAS NO REASON TO THINK THAT DEFEAT

DEVICES MIGHT FEATURE IN MODELS OF VEHICLE- VW OR OTHERWISEmiddot THAT HAVE NOT YET BEEN RECALLED FROM SALE

71 We can confirm this for Volkswagen UK models based on our current information

8 IT HAS EMERGED THAT THERE ARE 11IRREGULARITIES11 AND 11 UNEllPLAINED

INCONSISTENCIES IN THE LEVELS OF C02 EMITTED BY VW CARS AND THAT C02

LEVELS AND FUEL CONSUMPTION FIGURES FOR SOME MODELS WERE SET TOO LOW

DURING TESTS CAN CONSUMERS BE CONFIDENT THAT THE RATINGS ON FUEL

CONSUMPTION AND C02 EMISSIONS PROVIDED FOR THEIR CARS ARE ACCURATE AND IF NOT WHAT STEPS WILL VW UK BE TAKING

81 In the UK the vast majority of drivers who have purchased Volkswagen Group vehicles can be confident that the C02 emissions levels and the fuel consumption figures for their vehicles are accurate based on current knowledge

82 However our initial investigations suggest that a very small minority of owners may be potentially affected by the issue that you have raised Investigations are currently ongoing to determine

(a) specifically which vehicles are affected and

(b) the extent of any irregularities

83 We appreciate that given the ongoing investigation the level of information presently available in relation to the C02 emissions issue is relatively limited For that reason and if it would be helpful we would be pleased to write to the Committee again at a later date to provide additional information

84 Once we have that infonnation and have discussed it with the relevant authorities we will contact those customers that are affected to inf01m them of the issue and ofany steps that will need to be taken

85 Please be assured that the Volkswagen Group is doing everything in its power to clarify the situation and is closely liaising with the relevant approval authorities in order to do so

86 To the extent that the hrngularities in relation to C02 have implications in terms of the taxes and duties based on such figures we can confirm that the Volkswagen Group has contacted the relevant UK authorities to assure them that we are willing to pay those potential additional taxes and duties properly due or payable as a direct result of the C02 issue and to request that they are charged directly to the Volkswagen Group and not to customers

I

I

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

2 WHAT WILL THE COMPANY DO TO THE SOFTWARE WHEN YOU RECALL THE

AFFECTED CARS AND HOW MUCH LESS WILL THEIR NOX EMISSIONS BE COMPARED

WITH THE LEVELS BEFORE RECALL

21 NOx emissions in the real world (to which this question presumably relates) are not based on emissions produced in the testing regime instead they are dependent upon the way vehicles are individually driven on the road Individual driving styles and conditions determine real world emissions and are often outside the parameters of the laboratory testing standards

22 As pati of the service action that the Volkswagen Group has proposed to the relevant approval authorities all of the affected vehicles will have their software updated That update will only happen once it has been approved by the authorities

23 The result of that software being updated will be that the affected vehicles are capable ofcomplying with the testing limits for NOx during testing in a manner that is fillly approved by the relevant regulatory authorities

24 To do this the Volkswagen Group will undeliake technical measures in 2016 and will be able to introduce and take advantage of the benefits of all of the su)sequent advances in diesel engine technology and indeed in advances in NOx emissions testing (based on subsequently developed drive cycles albeit none ofwhich are typical of average driving in the UK) developed since these older models were originally produced Since that time there have been considerable advances in the technology and learning concerning after treatment systems and how to optimise their operation controlled legitimately by the engine software

25 In introducing this improved technology and learning into the older models the Volkswagen Group believes that the affected vehicles real world NOx emissions are likely to decrease as compared to levels that the original car would have produced in similar conditions (bearing in mind that there has never been an approved real world drive cycle to allow such a comparison to be made with certainty) This would be similarly the case if the Volkswagen Group introduced improved diesel technology and learning into unaffected models from the years 2007-2012 That is any reduction in real world NOx et111ssions here is only caused by the introduction of the more modern engine teclmology and learning via the technical measures

26 This leads to a related issue raised during the session on 15 October 2015 namely how much more NOx has been emitted by the affected vehicles in the real world than would have been the case had the affected vehicles not had NOx emission testing issues To be clear that question is different to Q2 above which considers the future emissions after the technical measures being implemented

27 It would obviously be preferable to be able to answer this question based on objective data or measurements based on agreed standardised systems However when the affected vehicles were originally tested for NOx emissions limits the only relevant test was the laboratory dynometer bench test There was no real world drive testing required and no reliable acceptable way of conducting such tests All of the affected vehicles complied with the EU5 emissions limits as measured in the laboratory bench test

28 Ifa driver drove the affected vehicle exactly like the ce11ification cycle NEDC he or she would achieve the same emissions as achieved in the laborato1y during emissions testing But it is highly unlikely that vehicles would have been driven on UK roads in a manner similar to the laboratory bench testing It is therefore the case that the emissions in the real world in the UK from those vehicles would have been higher than those measured in the laboratory This would have been the case for all manufacturers vehicles

29 In summary the testing software does not influence NOx emissions on those vehicles when driven in the real world Instead it is the driving style or cycle or conditions of driving that actually influences the NOx emissions

3 AFTER VOLKSWAGEN HAS CHANGED THE SOFTWARE FOLLOWING RECALL

HOW llUCH DIFFERENT FROM THE REGULATORY LIMIT WILL THE REAL WORLD

EMISSIONS BE AND WHY SHOULD THEY BE DIFFERENT AT ALL

31 As we have noted above given that there is no consensus on what amounts to real world driving in the UK we are unable to quantify the difference between the regulatory NOx limit during testing and the actual real world NOx emissions on the road

32 However ilrnspective of any software that is updated as pait of the proposed service action it must be recognised that the current regulatory regime and the present technology available to all manufacturers means that in practice there will be a difference between a vehicles NOx emissions during testing and emissions on the road when driven in a different manner The extent of that difference will depend upon precisely how the car is individually driven and the conditions under which it is driven We anticipate that those differences will remain after the approved software is updated as would be the case for all manufacturers vehicles

33 As stated above if you have a regulatory regime that is not related to real world driving (and no regulatory regime can be reflective of all driving in all circumstances) then there will be a difference between real world emissions and regulatory emissions in testing

34 The current regulatory testing regime has deficiencies that are widely known both inside and outside of the motor vehicle industry For that reason we support moves toward a more appropriate testing regime that better reflects real world driving

-----------------middot-middot- ---~

4 V OLKSV AGEN UK HAS STOPPED SELLING NEW CARS WHICH COULD HAVE

DEFEAT DEVICES HAVE YOU ALSO STOPPED POTENTIALLY AFFECTED MODELS

BEING SOLD THROUGH YOUR USED CAR PROGRAMME DAS WELTAUTO

41 Volkswagen has not halted sales of used vehicles that have the potential to be affected by the NOx issue via the Das WeltAuto programme We have taken this decision because

(a) those vehicles remain teclmically safe and roadwo1thy and are already legally on the road

(b) all of the affected vehicles will be subject to the approved technical meas mes in the near future

(c) any customer that is considering purchasing one of the affected vehicles will be notified of that fact as well as the necessity of the implementation of a technical measures before they purchase the vehicle in question

5 WILL VOLKSWAGEN UK OFFER ANY INCENTIVES TO CUSTOMERS IMPACTED

BY THE ISSUE TO UNDERTAKE A FIX THAT MIGHT IMPACT THEIR CARS

PERFORMANCE

51 Om intention remains that the implementation of the technical measures will not affect the vehicles performance Once it has been confirmed that performance will not be affected this will be widely publicised so as to ensure that customers are encouraged to adopt the implementation of the technical measures The work that is undertaken in relation to that fix will be carried out free ofcharge

52 In line with the DVSAs Guidelines the Volkswagen Group will not offer an incentive to customers to encourage them to implement the technical measmes In the event that the implementation of the teclmical measmes is lower than hoped this can be reviewed with the DVSA

53 We can also confirm that our anticipation is that the timing for implementation of the technical measures for all of the affected vehicles is expected to be less than one hour As a result and so as to minimise inconvenience our anticipation is that the technical measures can be implemented as part of owners usual service which has traditionally encouraged high take up or by making a shmt visit to an authorised retailer The Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the teclmical solution and include a range ofmobility options free of charge where appropriate

6 You WILL BE AWARE OF THE RECENT DECISION BY THE EU TECHNICAL

COMMITTEE ON MOTOR VEHICLES TO SIGNIFICANTLY INCREASE THE PERMITTED LEVELS OF NOX EMISSIONS FROM EURO 6 VEHICLES AND DELAY THE

IMPLEMENTATION OF THE LIMITS FOR ALL NEW CARS UNTIL 2019 DOES VOLKSWAGEN UK SUPPORT THAT DECISION

61 Yes the Volkswagen Group supp01ts the decision of the EU Technical Committee of Motor Vehicles (TCMV) as supported by the British Government and the introduction of a more modern real driving emissions (RDE) testing regime The legislation is due to be implemented in 2016 with a monitoring phase Limits will apply from September 2017

62 RDE and the conformity factor applicable from 2020 of I plus a margin for error of 05 represents a major challenge for the industry Up until now the indushy was legally required to meet the limits under NEDC The timeline boundary conditions and conformity factors agreed by TCMV are extremely challenging for the industty

7 CAN YOU CONFIRM THAT VW HAS NO REASON TO THINK THAT DEFEAT

DEVICES MIGHT FEATURE IN MODELS OF VEHICLE- VW OR OTHERWISEmiddot THAT HAVE NOT YET BEEN RECALLED FROM SALE

71 We can confirm this for Volkswagen UK models based on our current information

8 IT HAS EMERGED THAT THERE ARE 11IRREGULARITIES11 AND 11 UNEllPLAINED

INCONSISTENCIES IN THE LEVELS OF C02 EMITTED BY VW CARS AND THAT C02

LEVELS AND FUEL CONSUMPTION FIGURES FOR SOME MODELS WERE SET TOO LOW

DURING TESTS CAN CONSUMERS BE CONFIDENT THAT THE RATINGS ON FUEL

CONSUMPTION AND C02 EMISSIONS PROVIDED FOR THEIR CARS ARE ACCURATE AND IF NOT WHAT STEPS WILL VW UK BE TAKING

81 In the UK the vast majority of drivers who have purchased Volkswagen Group vehicles can be confident that the C02 emissions levels and the fuel consumption figures for their vehicles are accurate based on current knowledge

82 However our initial investigations suggest that a very small minority of owners may be potentially affected by the issue that you have raised Investigations are currently ongoing to determine

(a) specifically which vehicles are affected and

(b) the extent of any irregularities

83 We appreciate that given the ongoing investigation the level of information presently available in relation to the C02 emissions issue is relatively limited For that reason and if it would be helpful we would be pleased to write to the Committee again at a later date to provide additional information

84 Once we have that infonnation and have discussed it with the relevant authorities we will contact those customers that are affected to inf01m them of the issue and ofany steps that will need to be taken

85 Please be assured that the Volkswagen Group is doing everything in its power to clarify the situation and is closely liaising with the relevant approval authorities in order to do so

86 To the extent that the hrngularities in relation to C02 have implications in terms of the taxes and duties based on such figures we can confirm that the Volkswagen Group has contacted the relevant UK authorities to assure them that we are willing to pay those potential additional taxes and duties properly due or payable as a direct result of the C02 issue and to request that they are charged directly to the Volkswagen Group and not to customers

I

I

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

27 It would obviously be preferable to be able to answer this question based on objective data or measurements based on agreed standardised systems However when the affected vehicles were originally tested for NOx emissions limits the only relevant test was the laboratory dynometer bench test There was no real world drive testing required and no reliable acceptable way of conducting such tests All of the affected vehicles complied with the EU5 emissions limits as measured in the laboratory bench test

28 Ifa driver drove the affected vehicle exactly like the ce11ification cycle NEDC he or she would achieve the same emissions as achieved in the laborato1y during emissions testing But it is highly unlikely that vehicles would have been driven on UK roads in a manner similar to the laboratory bench testing It is therefore the case that the emissions in the real world in the UK from those vehicles would have been higher than those measured in the laboratory This would have been the case for all manufacturers vehicles

29 In summary the testing software does not influence NOx emissions on those vehicles when driven in the real world Instead it is the driving style or cycle or conditions of driving that actually influences the NOx emissions

3 AFTER VOLKSWAGEN HAS CHANGED THE SOFTWARE FOLLOWING RECALL

HOW llUCH DIFFERENT FROM THE REGULATORY LIMIT WILL THE REAL WORLD

EMISSIONS BE AND WHY SHOULD THEY BE DIFFERENT AT ALL

31 As we have noted above given that there is no consensus on what amounts to real world driving in the UK we are unable to quantify the difference between the regulatory NOx limit during testing and the actual real world NOx emissions on the road

32 However ilrnspective of any software that is updated as pait of the proposed service action it must be recognised that the current regulatory regime and the present technology available to all manufacturers means that in practice there will be a difference between a vehicles NOx emissions during testing and emissions on the road when driven in a different manner The extent of that difference will depend upon precisely how the car is individually driven and the conditions under which it is driven We anticipate that those differences will remain after the approved software is updated as would be the case for all manufacturers vehicles

33 As stated above if you have a regulatory regime that is not related to real world driving (and no regulatory regime can be reflective of all driving in all circumstances) then there will be a difference between real world emissions and regulatory emissions in testing

34 The current regulatory testing regime has deficiencies that are widely known both inside and outside of the motor vehicle industry For that reason we support moves toward a more appropriate testing regime that better reflects real world driving

-----------------middot-middot- ---~

4 V OLKSV AGEN UK HAS STOPPED SELLING NEW CARS WHICH COULD HAVE

DEFEAT DEVICES HAVE YOU ALSO STOPPED POTENTIALLY AFFECTED MODELS

BEING SOLD THROUGH YOUR USED CAR PROGRAMME DAS WELTAUTO

41 Volkswagen has not halted sales of used vehicles that have the potential to be affected by the NOx issue via the Das WeltAuto programme We have taken this decision because

(a) those vehicles remain teclmically safe and roadwo1thy and are already legally on the road

(b) all of the affected vehicles will be subject to the approved technical meas mes in the near future

(c) any customer that is considering purchasing one of the affected vehicles will be notified of that fact as well as the necessity of the implementation of a technical measures before they purchase the vehicle in question

5 WILL VOLKSWAGEN UK OFFER ANY INCENTIVES TO CUSTOMERS IMPACTED

BY THE ISSUE TO UNDERTAKE A FIX THAT MIGHT IMPACT THEIR CARS

PERFORMANCE

51 Om intention remains that the implementation of the technical measures will not affect the vehicles performance Once it has been confirmed that performance will not be affected this will be widely publicised so as to ensure that customers are encouraged to adopt the implementation of the technical measures The work that is undertaken in relation to that fix will be carried out free ofcharge

52 In line with the DVSAs Guidelines the Volkswagen Group will not offer an incentive to customers to encourage them to implement the technical measmes In the event that the implementation of the teclmical measmes is lower than hoped this can be reviewed with the DVSA

53 We can also confirm that our anticipation is that the timing for implementation of the technical measures for all of the affected vehicles is expected to be less than one hour As a result and so as to minimise inconvenience our anticipation is that the technical measures can be implemented as part of owners usual service which has traditionally encouraged high take up or by making a shmt visit to an authorised retailer The Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the teclmical solution and include a range ofmobility options free of charge where appropriate

6 You WILL BE AWARE OF THE RECENT DECISION BY THE EU TECHNICAL

COMMITTEE ON MOTOR VEHICLES TO SIGNIFICANTLY INCREASE THE PERMITTED LEVELS OF NOX EMISSIONS FROM EURO 6 VEHICLES AND DELAY THE

IMPLEMENTATION OF THE LIMITS FOR ALL NEW CARS UNTIL 2019 DOES VOLKSWAGEN UK SUPPORT THAT DECISION

61 Yes the Volkswagen Group supp01ts the decision of the EU Technical Committee of Motor Vehicles (TCMV) as supported by the British Government and the introduction of a more modern real driving emissions (RDE) testing regime The legislation is due to be implemented in 2016 with a monitoring phase Limits will apply from September 2017

62 RDE and the conformity factor applicable from 2020 of I plus a margin for error of 05 represents a major challenge for the industry Up until now the indushy was legally required to meet the limits under NEDC The timeline boundary conditions and conformity factors agreed by TCMV are extremely challenging for the industty

7 CAN YOU CONFIRM THAT VW HAS NO REASON TO THINK THAT DEFEAT

DEVICES MIGHT FEATURE IN MODELS OF VEHICLE- VW OR OTHERWISEmiddot THAT HAVE NOT YET BEEN RECALLED FROM SALE

71 We can confirm this for Volkswagen UK models based on our current information

8 IT HAS EMERGED THAT THERE ARE 11IRREGULARITIES11 AND 11 UNEllPLAINED

INCONSISTENCIES IN THE LEVELS OF C02 EMITTED BY VW CARS AND THAT C02

LEVELS AND FUEL CONSUMPTION FIGURES FOR SOME MODELS WERE SET TOO LOW

DURING TESTS CAN CONSUMERS BE CONFIDENT THAT THE RATINGS ON FUEL

CONSUMPTION AND C02 EMISSIONS PROVIDED FOR THEIR CARS ARE ACCURATE AND IF NOT WHAT STEPS WILL VW UK BE TAKING

81 In the UK the vast majority of drivers who have purchased Volkswagen Group vehicles can be confident that the C02 emissions levels and the fuel consumption figures for their vehicles are accurate based on current knowledge

82 However our initial investigations suggest that a very small minority of owners may be potentially affected by the issue that you have raised Investigations are currently ongoing to determine

(a) specifically which vehicles are affected and

(b) the extent of any irregularities

83 We appreciate that given the ongoing investigation the level of information presently available in relation to the C02 emissions issue is relatively limited For that reason and if it would be helpful we would be pleased to write to the Committee again at a later date to provide additional information

84 Once we have that infonnation and have discussed it with the relevant authorities we will contact those customers that are affected to inf01m them of the issue and ofany steps that will need to be taken

85 Please be assured that the Volkswagen Group is doing everything in its power to clarify the situation and is closely liaising with the relevant approval authorities in order to do so

86 To the extent that the hrngularities in relation to C02 have implications in terms of the taxes and duties based on such figures we can confirm that the Volkswagen Group has contacted the relevant UK authorities to assure them that we are willing to pay those potential additional taxes and duties properly due or payable as a direct result of the C02 issue and to request that they are charged directly to the Volkswagen Group and not to customers

I

I

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

-----------------middot-middot- ---~

4 V OLKSV AGEN UK HAS STOPPED SELLING NEW CARS WHICH COULD HAVE

DEFEAT DEVICES HAVE YOU ALSO STOPPED POTENTIALLY AFFECTED MODELS

BEING SOLD THROUGH YOUR USED CAR PROGRAMME DAS WELTAUTO

41 Volkswagen has not halted sales of used vehicles that have the potential to be affected by the NOx issue via the Das WeltAuto programme We have taken this decision because

(a) those vehicles remain teclmically safe and roadwo1thy and are already legally on the road

(b) all of the affected vehicles will be subject to the approved technical meas mes in the near future

(c) any customer that is considering purchasing one of the affected vehicles will be notified of that fact as well as the necessity of the implementation of a technical measures before they purchase the vehicle in question

5 WILL VOLKSWAGEN UK OFFER ANY INCENTIVES TO CUSTOMERS IMPACTED

BY THE ISSUE TO UNDERTAKE A FIX THAT MIGHT IMPACT THEIR CARS

PERFORMANCE

51 Om intention remains that the implementation of the technical measures will not affect the vehicles performance Once it has been confirmed that performance will not be affected this will be widely publicised so as to ensure that customers are encouraged to adopt the implementation of the technical measures The work that is undertaken in relation to that fix will be carried out free ofcharge

52 In line with the DVSAs Guidelines the Volkswagen Group will not offer an incentive to customers to encourage them to implement the technical measmes In the event that the implementation of the teclmical measmes is lower than hoped this can be reviewed with the DVSA

53 We can also confirm that our anticipation is that the timing for implementation of the technical measures for all of the affected vehicles is expected to be less than one hour As a result and so as to minimise inconvenience our anticipation is that the technical measures can be implemented as part of owners usual service which has traditionally encouraged high take up or by making a shmt visit to an authorised retailer The Volkswagen Group in the UK are looking at a range of options to minimise customer inconvenience Those options are dependent on the teclmical solution and include a range ofmobility options free of charge where appropriate

6 You WILL BE AWARE OF THE RECENT DECISION BY THE EU TECHNICAL

COMMITTEE ON MOTOR VEHICLES TO SIGNIFICANTLY INCREASE THE PERMITTED LEVELS OF NOX EMISSIONS FROM EURO 6 VEHICLES AND DELAY THE

IMPLEMENTATION OF THE LIMITS FOR ALL NEW CARS UNTIL 2019 DOES VOLKSWAGEN UK SUPPORT THAT DECISION

61 Yes the Volkswagen Group supp01ts the decision of the EU Technical Committee of Motor Vehicles (TCMV) as supported by the British Government and the introduction of a more modern real driving emissions (RDE) testing regime The legislation is due to be implemented in 2016 with a monitoring phase Limits will apply from September 2017

62 RDE and the conformity factor applicable from 2020 of I plus a margin for error of 05 represents a major challenge for the industry Up until now the indushy was legally required to meet the limits under NEDC The timeline boundary conditions and conformity factors agreed by TCMV are extremely challenging for the industty

7 CAN YOU CONFIRM THAT VW HAS NO REASON TO THINK THAT DEFEAT

DEVICES MIGHT FEATURE IN MODELS OF VEHICLE- VW OR OTHERWISEmiddot THAT HAVE NOT YET BEEN RECALLED FROM SALE

71 We can confirm this for Volkswagen UK models based on our current information

8 IT HAS EMERGED THAT THERE ARE 11IRREGULARITIES11 AND 11 UNEllPLAINED

INCONSISTENCIES IN THE LEVELS OF C02 EMITTED BY VW CARS AND THAT C02

LEVELS AND FUEL CONSUMPTION FIGURES FOR SOME MODELS WERE SET TOO LOW

DURING TESTS CAN CONSUMERS BE CONFIDENT THAT THE RATINGS ON FUEL

CONSUMPTION AND C02 EMISSIONS PROVIDED FOR THEIR CARS ARE ACCURATE AND IF NOT WHAT STEPS WILL VW UK BE TAKING

81 In the UK the vast majority of drivers who have purchased Volkswagen Group vehicles can be confident that the C02 emissions levels and the fuel consumption figures for their vehicles are accurate based on current knowledge

82 However our initial investigations suggest that a very small minority of owners may be potentially affected by the issue that you have raised Investigations are currently ongoing to determine

(a) specifically which vehicles are affected and

(b) the extent of any irregularities

83 We appreciate that given the ongoing investigation the level of information presently available in relation to the C02 emissions issue is relatively limited For that reason and if it would be helpful we would be pleased to write to the Committee again at a later date to provide additional information

84 Once we have that infonnation and have discussed it with the relevant authorities we will contact those customers that are affected to inf01m them of the issue and ofany steps that will need to be taken

85 Please be assured that the Volkswagen Group is doing everything in its power to clarify the situation and is closely liaising with the relevant approval authorities in order to do so

86 To the extent that the hrngularities in relation to C02 have implications in terms of the taxes and duties based on such figures we can confirm that the Volkswagen Group has contacted the relevant UK authorities to assure them that we are willing to pay those potential additional taxes and duties properly due or payable as a direct result of the C02 issue and to request that they are charged directly to the Volkswagen Group and not to customers

I

I

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

6 You WILL BE AWARE OF THE RECENT DECISION BY THE EU TECHNICAL

COMMITTEE ON MOTOR VEHICLES TO SIGNIFICANTLY INCREASE THE PERMITTED LEVELS OF NOX EMISSIONS FROM EURO 6 VEHICLES AND DELAY THE

IMPLEMENTATION OF THE LIMITS FOR ALL NEW CARS UNTIL 2019 DOES VOLKSWAGEN UK SUPPORT THAT DECISION

61 Yes the Volkswagen Group supp01ts the decision of the EU Technical Committee of Motor Vehicles (TCMV) as supported by the British Government and the introduction of a more modern real driving emissions (RDE) testing regime The legislation is due to be implemented in 2016 with a monitoring phase Limits will apply from September 2017

62 RDE and the conformity factor applicable from 2020 of I plus a margin for error of 05 represents a major challenge for the industry Up until now the indushy was legally required to meet the limits under NEDC The timeline boundary conditions and conformity factors agreed by TCMV are extremely challenging for the industty

7 CAN YOU CONFIRM THAT VW HAS NO REASON TO THINK THAT DEFEAT

DEVICES MIGHT FEATURE IN MODELS OF VEHICLE- VW OR OTHERWISEmiddot THAT HAVE NOT YET BEEN RECALLED FROM SALE

71 We can confirm this for Volkswagen UK models based on our current information

8 IT HAS EMERGED THAT THERE ARE 11IRREGULARITIES11 AND 11 UNEllPLAINED

INCONSISTENCIES IN THE LEVELS OF C02 EMITTED BY VW CARS AND THAT C02

LEVELS AND FUEL CONSUMPTION FIGURES FOR SOME MODELS WERE SET TOO LOW

DURING TESTS CAN CONSUMERS BE CONFIDENT THAT THE RATINGS ON FUEL

CONSUMPTION AND C02 EMISSIONS PROVIDED FOR THEIR CARS ARE ACCURATE AND IF NOT WHAT STEPS WILL VW UK BE TAKING

81 In the UK the vast majority of drivers who have purchased Volkswagen Group vehicles can be confident that the C02 emissions levels and the fuel consumption figures for their vehicles are accurate based on current knowledge

82 However our initial investigations suggest that a very small minority of owners may be potentially affected by the issue that you have raised Investigations are currently ongoing to determine

(a) specifically which vehicles are affected and

(b) the extent of any irregularities

83 We appreciate that given the ongoing investigation the level of information presently available in relation to the C02 emissions issue is relatively limited For that reason and if it would be helpful we would be pleased to write to the Committee again at a later date to provide additional information

84 Once we have that infonnation and have discussed it with the relevant authorities we will contact those customers that are affected to inf01m them of the issue and ofany steps that will need to be taken

85 Please be assured that the Volkswagen Group is doing everything in its power to clarify the situation and is closely liaising with the relevant approval authorities in order to do so

86 To the extent that the hrngularities in relation to C02 have implications in terms of the taxes and duties based on such figures we can confirm that the Volkswagen Group has contacted the relevant UK authorities to assure them that we are willing to pay those potential additional taxes and duties properly due or payable as a direct result of the C02 issue and to request that they are charged directly to the Volkswagen Group and not to customers

I

I

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

84 Once we have that infonnation and have discussed it with the relevant authorities we will contact those customers that are affected to inf01m them of the issue and ofany steps that will need to be taken

85 Please be assured that the Volkswagen Group is doing everything in its power to clarify the situation and is closely liaising with the relevant approval authorities in order to do so

86 To the extent that the hrngularities in relation to C02 have implications in terms of the taxes and duties based on such figures we can confirm that the Volkswagen Group has contacted the relevant UK authorities to assure them that we are willing to pay those potential additional taxes and duties properly due or payable as a direct result of the C02 issue and to request that they are charged directly to the Volkswagen Group and not to customers

I

I

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

VOLKSWAGEN AKTI E IIG ESpound llSCHAfT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers Iimllfl IIlpecca

Statement on the announcement bY- the United States Environmental Protection Agency (EPA)

Wolfsburg November 2 2015 - The United States Environmental Protection Agency (EPA) Informed Volkswagen Aktlengesellschaft on Monday that vehicles with V6 TOI engines had a software function which had not been adequately described in the application process Volkswagen AG wishes to emphasize that no software has been installed in the 3-llter V6 diesel power units to alter emissions characteristics In a forbidden manner

Volkswagen will cooperate fully with the EPA clarify this matter In Its entirety

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 53 619middot24319 wwwvolkswagen-media-servicescom wwwvolkswagenagcom

Nr 390 2015

-~-middotmiddot~middotmiddot~----shy-----------~-----shy

VOLKSWAGEN AKTI E 1G ESE llSCHAFT

Presse INews IPrensa ITlsk IImprensa IPrasa IStampa IPers I ffefi If) IIlpecca

Clarification moving forward internal investigations at Volkswagen identify irregularities in C02 levels

bull Matthias MUiier Relentless and comprehensive clarlflcallon is our only alternative middot

bull Around 800000 Group vehicles could be affected bull Initial estimate puts economic risks at approximately 2 billion euros

Wolfsburg November 3 2015 - The Volkswagen Group Is moving forward with the clarlflcation of the diesel Issue during the course of Internal investigations irregularities were found when determining type approval C02 levels Based on present knowledge around 800000 vehicles from the Volkswagen Group could be affected An Initial estimate puts the economic risks at approximately two billion euros The Board of Management of Volkswagen AG will Immediately start a dialog with the responsible type approval agencies regarding the consequences of these findings This should lead to a reliable assessment of the legal and the subsequent economic consequences of this not yet fully explained issue

Under the ongoing review of all processes and workflows in connection with diesel engines it was established that the C02 levels and thus the fuel consumption figures for some models were set loo low during the CO certification process The majority of the vehicles concerned have diesel engines

From the very start I have pushed hard for the relentless and comprehensive clarification of events We will stop at nothing and nobody This Is a painful process but il is our only alternative For us the only thing that counts is the truth That is the basis for the fundamental realignment that Volkswagen needs Matthias MOiier CEO of Volkswagen Aktlengesellschaft said and added The Board of Management of Volkswagen AG deeply regrets thls situation and wishes to underscore Its determination to systematically continue along the present path of clarification and transparency

In cooperation with the responsible authorities Volkswagen will do emiddotverythlng in Its power to clarify the further course of action as quickly as possible_ and ensure the correct C02

classification for the vehicles affected

The safety of the vehicles Is in no way compromised A reliable assessment of the scale of these irregularities Is not yet possible An Initial estimate puts the economic risks at approximately two billion euros

No 3922015

--------------------- --- ---middotmiddotmiddot~middot-middotmiddot~--~---shy

VOLKSWAGEN AKT IEUG ESpound llSCHAfT

Page2

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 5361 9-24319 E-mail hans-gerdbodevolkswagende w11wvolkswagen-media-servicescom wwvvolkswagenagcom

No 39212015

--------------------- --- ---middotmiddotmiddot~middot-middotmiddot~--~---shy

VOLKSWAGEN AKT IEUG ESpound llSCHAfT

Page2

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 5361 9-24319 E-mail hans-gerdbodevolkswagende w11wvolkswagen-media-servicescom wwvvolkswagenagcom

No 39212015

VOLlltSWAGEN AKTI f IIG f SE LlSCHAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers I~PTI Inpeccu

Statement of the Supervisory Board on irregularities in C02 levels

The Supervisory Board Is deeply concerned by the dls~overy of Irregularities found when determining C02 levels for the type approval of Volkswagen Group vehicles These Irregularities canie to light during the clarification process which as middot announced is being relentlessly and comprehensively pursued The Supervisory Board and the special committee set up for the purpose of clarlflcatlon wlll meet In the very near future to consult on further measures and consequences The Supervisory Board wlll continue to ensure swift and meticulous clarification In this regard the latest findings must be an Incentive for the Supervisory Board and the Board of Management to do their utmost to resolve such irregularities and rebuild trust

Volkswagen Group Communications Head of Group Communications Hans-Gerd Bode Phone +49 (0) 5361 9-24319 E-mail hans-gerdbodevolkswagende wwwvolkswagen-media-servlcescom wwwvolkswagenaqcom

No 3932015

middotvoLKSWAGEN OROUP UNITEQ KINODOM LTD

Mr Huw lrranca-Davles MP Chair of the Environmental Audit Committee 01908 601789 Committee Office 01908 601295 House of Commons paulwllllsvwgcouk 14 Tothlll Street London SW1H 9NB

10 December 2015

Dear Mr lrranca-Davles

Response to Environmental Audit Committee Questlons

1 write further to my letter dated 9 December 2015

I enclose a press release Issued by Volkswagen Aktiengesellschaft yesterday As promised I have also updated our response to the eighth question posed by the Environmental Audit Committee concerning irregularities relating to C02 and fuel consumption

ur sincerely

~j~ PauWlllis Ma Ing Director Volkswagen Group UK Limited

YOUR REFERENCE

OUR PEfERENCE

DIRECT TELEPHONE

DIRfCT FAX

poundMAil

DATE

VOLllt$VAGEN GROUP

UNITED kNGOO LIMITED

YEOMANS lJRlVE

BLAKELANDS

MllTOII KfNIS

JlK14 5AN

TELEPHONE 01908 601601

FACSIMILE 01908 663936

REGISTERED OffCE AS ABOVE

REGISlEfED ltl U~GLAND

REGISTEfEgt No St4809

AVHOllY OWNED SUBSIDIARY

OF VOLKSVAGEN AG

8 IT HAS EMERGED THAT THERE ARE 11JRREGULARITIES11 AND UNEXPLAINED

INCONSISTENCIES IN THE LEVELS OF C02 EMITTED BY VW CARS AND THAT C02

LEVELS AND FUEL CONSUMPTION FIGURES FOR SOME MODELS WERE SET TOO LOW

DURING TESTS CAN CONSUMERS BE CONFIDENT THAT THE RATINGS ON FUEL

CONSUMPTION AND C02 E~TISSIONS PROVIDED FOR TIIEIR CARS ARE ACCURATE ANDIFNOT WHAT STEPS WILL VWUKBETAKING

81 Yesterday Volkswagen Aktiengesellschaft issued a press release relevant to question eight As you will see Volkswagen Aktiengesellschaft has confirmed that almost all of the possibly affected Volkswagen Group brand models do in fact conform to the C02 levels as originally determined

82 Clearly that is very positive news to be welcomed It confirms that consumers who have purchased vehicles manufactured by the Volkswagen Group can remain confident that the C02 emissions and fuel consumption figures for their vehicles are accurate

83 For the Volkswagen brand there are nine model variants where a slight deviation of a few grams of C02 has been found However in respect of those vehicles our understanding is that any resulting changes going forward following the usual homologation process will be very small and prospective It is impo1tant to state that the testing methods and standards used at Volkswagen are in line with those commonly used in the industry They comply with the relevant international rules for such testing methods

84 We would also like to emphasise two points in relation to those deviations for those few model variants affected

(a) Firstly consumers real world fuel consumption and C02 figures will not change middot

(b) Secondly as production continues over time an element of movement in C02 and fuel consumption values is experienced by some models from time to time This is not an abnormal occurrence As a result there are established processes by which vehicle manufacturers work closely with the relevant approvals authorities in order to amend any values going forward As is noted in the press release we will be engaging with the appropriate authorities to conduct the relevant measurements by Christmas When fmther concrete info11nation becomes available in respect of the measurements for the nine model variations affected we will provide further information to our

customers and the Committee This process does not invalidate or correct the previous figure which was accurate for the time that it applied

85 Whilst we trnly regret the unce1tainty caused in relation to the C02 issue we hope that the early publication of our concems as well as our ultimate response here go some way towards demonstrating that the Volkswagen Group is fundamentally committed to transparency as we go through this difficult period

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VOLKSWAGEN AKTJ ENGE 5 E LLSCHAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers I ltfrJijJ IIlpecca

C02 issue largely concluded

bull No unlawful change to the stated fuel consumption and C02 figures found to date

bull Only a small number of the model variants of new cars will have the catalogue figure slightly adjusted

Wolfsburg 9 December 2015 - Just a month after questions relating to the C02 figures measured on some of the Groups models arose Volkswagen has largely concluded the clarification of the matter Following extensive internal investigations and measurement checks it is now clear that almost all of these model variants do correspond to the C02

figures originally determined This means that these vehicles can be marketed and sold without any limitations The suspicion that the fuel consumption figures of current production vehicles had been unlawfully changed was not confirmed During internal remeasurements slight deviations were found on just nine model variants of the Volkswagen brand

These model variants will be remeasured by a neutral technical service under the supervision of the appropriate authority by Christmas In cases where the correctness of original figures is confirmed there will be no consequences These cars can be offered for sale by dealers without any reservations In the case of any deviations the figures will be adjusted in the future in the course of the normal processes as required

Volkswagen presented these results to the investigation commission of the Federal Government and the Federal Motor Transport Authority (KBA) The figure of approximately 800000 vehicles under suspicion originally published by the Volkswagen Group has not been confirmed The deviations found in the figures for only nine model variants amount to a few grams of C02 on average corresponding to increased cycle consumption in the NEDC of approximately 01 to 02 litres per 100 kilometres With an annual production of approximately 36000 vehicles these model variants correspond to around only 05 per cent of the volume of the Volkswagen brand The list of the nine model variants can be found at wwwvolkswagenshymedia-servicescom

The Groups subsidiaries Audi SKODA and SEAT have also agreed a similar procedure with the approval authorities responsible for the vehicles initially considered

Customers real-world consumption figures do not change and neither are any technical vehicle modifications necessary Against this background the negative impact on earnings of euro2 billion that was originally expected has not been confirmed

Whether we will have a minor economic impact depends on the results of the remeasurement exercise

No 4322015

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VOLKSWAGEN AKTJ ENGE 5 E LLSCHAFT

Presse INews IPrensa ITisk IImprensa IPrasa IStampa IPers I ltfrJijJ IIlpecca

C02 issue largely concluded

bull No unlawful change to the stated fuel consumption and C02 figures found to date

bull Only a small number of the model variants of new cars will have the catalogue figure slightly adjusted

Wolfsburg 9 December 2015 - Just a month after questions relating to the C02 figures measured on some of the Groups models arose Volkswagen has largely concluded the clarification of the matter Following extensive internal investigations and measurement checks it is now clear that almost all of these model variants do correspond to the C02

figures originally determined This means that these vehicles can be marketed and sold without any limitations The suspicion that the fuel consumption figures of current production vehicles had been unlawfully changed was not confirmed During internal remeasurements slight deviations were found on just nine model variants of the Volkswagen brand

These model variants will be remeasured by a neutral technical service under the supervision of the appropriate authority by Christmas In cases where the correctness of original figures is confirmed there will be no consequences These cars can be offered for sale by dealers without any reservations In the case of any deviations the figures will be adjusted in the future in the course of the normal processes as required

Volkswagen presented these results to the investigation commission of the Federal Government and the Federal Motor Transport Authority (KBA) The figure of approximately 800000 vehicles under suspicion originally published by the Volkswagen Group has not been confirmed The deviations found in the figures for only nine model variants amount to a few grams of C02 on average corresponding to increased cycle consumption in the NEDC of approximately 01 to 02 litres per 100 kilometres With an annual production of approximately 36000 vehicles these model variants correspond to around only 05 per cent of the volume of the Volkswagen brand The list of the nine model variants can be found at wwwvolkswagenshymedia-servicescom

The Groups subsidiaries Audi SKODA and SEAT have also agreed a similar procedure with the approval authorities responsible for the vehicles initially considered

Customers real-world consumption figures do not change and neither are any technical vehicle modifications necessary Against this background the negative impact on earnings of euro2 billion that was originally expected has not been confirmed

Whether we will have a minor economic impact depends on the results of the remeasurement exercise

No 4322015

VOLKSWAGEN AKTI ENGE SE LLSCHAFT

Page2

Please note This text and the overview of vehicles to be adjusted in future with new C02

figures model year 2016 can be found at wwwvolkswaqen-media-servicescom The information contained in this press release does not apply to products and services from the Volkswagen Group ofAmerica or Volkswagen Canada

Volkswagen Group Communications Head of Product Communications Group Pietro Zollino Phone +49 (0) 53 61 9 - 2 99 22 E-Mail pietrozollinovolkswagende wwwvolkswagen-media-servicescom wwwvolkswagenagcom

No 4322015

List of vehicles model year 2016 where C02-values will be revised

Note For nine model versions the voluntary follow-up measurements have shown that for them adjustments of C02-figures need to be made Going forward they will be getting new catalogue figures at the earliest possible juncture as part of our normal processes

Car

Polo

Scirocco

Jetta

Jetta

Golf Convertible

Golf

Passat Alltrack

Passat Variant

Passat Variant

Engine

101 TSI BlueMotion 70kW EU6

201 TOI BMT 135kW EU6

121 TSI BMT 77kW EU6

201 TOI BMT 81kW EU6

20I TOI BMT 81kW EU6

20I TOI BMT 110kW EU6

201 TSI 4MOTION BMT 162kW EU6

20I TOI SCR 4MOTION BMT 176kW EU6

141 TSI ACT BMT 11 OkW EU6

Gearbox

Seven-speed (DSG)

Six-speed manual gearbox

Six-speed manual gearbox

Five-speed manual gearbox

Five-speed manual gearbox

Six-speed manual gearbox

Seven-speed (DSG)

Seven-speed (DSG)

Six-speed manual gearbox