Volkswagen diesel emissions fixing bill hits $30bn

Diesel Volkswagen and Audi vehicle,s that VW bought back from consumers, sit in Pontiac, Michigan.

The diesel emissions cheating scandal will cost Volkswagen an extra $3bn (€2.5bn), because engines are proving "far more technically complex and time consuming" to adapt the company said.

The additional cost, for fixing engines in the United States, takes the total bill to $30bn.

Two years after the problems first emerged, Volkswagen is still struggling to put the crisis behind it.

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

German media reports have named the person taken into custody as Wolfgang Hatz, former board member at VW unit Porsche. However there has been no official confirmation of his identity.

Mr Hatz was head of Research and Development at VW-owned Porsche and had held other roles in the VW group, including in engine development at Audi. He was suspended after the diesel emissions test-cheating was exposed. He then left the company.

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

Mr Hatz ran the engine development programme at VW's subsidiary Audi between 2001 and 2007

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

Another former Audi executive, Giovanni Pamio, was taken into custody earlier this year, at the request of the US Department of Justice. One man has so far been jailed in connection with the scandal: Volkswagen engineer James Liang received a 40 month sentence in a US court last month.

'Unexpected and unwelcome'

News of the additional financial burden from dealing with vehicles in the United States underlines the difficulty the company is having extricating itself from the scandal.

Shares in the German carmaker initially fell sharply on Friday although they later recovered most of the lost ground.

"This is yet another unexpected and unwelcome announcement from VW, not only from an earnings and cash flow perspective but also with respect to the credibility of management," said Arndt Ellinghorst, analyst at Evercore ISI.

VW first admitted in September 2015 that it had used illegal software to cheat US emissions tests.

Since then the firm has been adapting its cars to meet legal requirements. But the process in the United States is proving tougher than expected.

It is also amending cars in Europe, but the process there is more straightforward, VW said.

The additional costs will be reflected in VW's third quarter results, which will be reported next month.