US chief knew Volkswagen could be breaking emissions rules 18 months ago

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Volkswagen Executive in the Hot Seat on Capitol Hill

Volkswagen's top U.S. executive knew the carmaker might be breaking U.S. emissions rules as long as 18 months before it admitted cheating diesel tests to regulators, he will tell a panel of U.S. lawmakers on Thursday.

The admission by Michael Horn, in a written testimony to a congressional oversight panel a day ahead of Thursday's hearing, is likely to raise questions about why the German company did not act more quickly to tackle its wrongdoing.

Almost three weeks after it confessed publicly to rigging U.S. emissions tests, Europe's largest carmaker is under huge pressure to identify those responsible, fix affected vehicles and clarify exactly how and where the cheating happened.

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Volkswagen emissions scandal
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US chief knew Volkswagen could be breaking emissions rules 18 months ago
The Oct. 5, 2015 photo shows a man sitting on a bench in front of the Volkswagen factories in Wolfsburg, northern Germany. For Volkswagen, the cost of its cheating on emissions tests in the U.S. is likely to run into the tens of billions of dollars and prematurely end its long-sought status as the world's biggest carmaker. (Julian Stratenschulte/dpa via AP)
FILE - In this Sept. 21, 2015 file photo President and CEO of Volkswagen Group of America, Inc. Michael Horn at the Brooklyn Navy Yard in New York. Volkswagen's top U.S.-based executive is expected to testify before Congress Thursday that he first learned in 2014 of emissions problems with the German automaker's diesel cars. But in prepared remarks, Volkswagen Group of America CEO Michael Horn doesn't directly address when he was first told his company had developed on-board computer software designed to deceive emissions tests. (AP Photo/Kevin Hagen, File)
Hans Dieter Poetsch, new chairman of the board of directors of the Volkswagen stock company, arrives for a press statement at the company headquarter in Wolfsburg, Germany, Wednesday, Oct. 7, 2015. He fills a position vacated when longtime chairman Ferdinand Piech resigned in April. (AP Photo/Michael Sohn)
This photo taken on Sept. 29, 2015 shows the power plant of the Volkswagen factory in the city Wolfsburg, Germany. Thanks to Volkswagen, Wolfsburg boomed in West Germanyâs postwar rebirth and today the town and the company are inseparable. (AP Photo/Markus Schreiber)
This photo taken on Sept. 29, 2015 shows the power plant of the Volkswagen factory and the Science Center, right, in the city Wolfsburg, Germany. Thanks to Volkswagen, Wolfsburg boomed in West Germanyâs postwar rebirth and today the town and the company are inseparable. (AP Photo/Markus Schreiber)
In this Sept. 30, 2015, photo, John Swanton, spokesman with the California Air Resources Board explains how a 2013 Volkswagen Passat with a diesel engine is evaluated at the emissions test lab in El Monte, Calif. Three years after Volkswagen opened a pollution testing center in Oxnard, Calif., VW admitted that it manipulated emissions results in 482,000 U.S. diesel vehicles to make them appear to run cleaner, raising questions around Volkswagenâs only test center in North America. (AP Photo/Nick Ut)
New cars of the German car manufacturer Volkswagen are ready to be shipped at the Volkswagen factory in Emden, Germany, Sept. 30, 2015. (Ingo Wagner, dpa via AP)
This Sept. 28, 2015 photo shows Volkswagenâs only test center in North America in Oxnard, Calif. Three years after Volkswagen opened the pollution testing center, VW admitted that it manipulated emissions results in 482,000 U.S. diesel vehicles to make them appear to run cleaner, raising questions around Volkswagenâs only test center in North America. (AP Photo/Gillian Flaccus)
Newly appointed Volkswagen CEO Matthias Mueller smiles during a press statement after a meeting of Volkswagen's supervisory board in Wolfsburg, Germany, Friday, Sept. 25, 2015, after CEO Martin Winterkorn resigned on Wednesday amid an emissions scandal. (AP Photo/Michael Sohn)
RETRANSMITS graphic that moved Oct. 3; graphic shows vehicles affected by Volkswagen's emissions violations and estimated deaths in the U.S. from the excess pollution; 3c x 5 inches; 146 mm x 127 mm;
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The biggest business crisis in Volkswagen's 78-year history has wiped more than a third off its share price, forced out its long-time chief executive and sent shockwaves through both the global car industry and the German establishment.

"In the spring of 2014 ... I was told that there was a possible emissions non-compliance that could be remedied," Horn, President and CEO of Volkswagen Group of America, said in his statement published on a U.S. House of Representatives website.

"I was also informed that the company engineers would work with the agencies to resolve the issue," he said, without identifying the people providing him with the information.

It was not until Sept. 3, 2015, that Volkswagen told U.S. regulators it had installed so-called "defeat devices" in some diesel engines to mask their true level of toxic emissions. U.S. regulators made public the wrongdoing on Sept. 18.

Volkswagen has come under fire on both sides of the Atlantic for its handling of the crisis, with lawmakers, investors and customers saying it has been too slow to release information.

Analysts are still unsure how widespread the cheating was.

Germany's Sueddeutsche Zeitung newspaper reported on Thursday that Volkswagen's manipulation software was switched on in Europe.

The company has previously said that, while the software was installed in around 11 million diesel vehicles, mostly in Europe, it was not active in the majority of them.

Volkswagen did not respond to requests for comment.

See the auto manufactureres with the highest number of recalls:


IN-HOUSE

Volkswagen has suspended more than 10 senior managers, including three top engineers, as part of an internal investigation. It has also hired U.S. law firm Jones Day to conduct an external inquiry.

But some analysts have questioned whether new Chairman Hans Dieter Poetsch and new CEO Matthias Mueller, both company veterans, will introduce the sweeping changes in business practices they think are necessary to restore Volkswagen's reputation.

Poetsch said on Wednesday it would take "some time" to get to the bottom of the matter.

The company, controlled by the Piech-Porsche clan, is not drawing on outside public relations and restructuring experts to help with damage-limitation efforts or its plans for a new company structure, one source close to the board said.

"There's a strong tradition to handle such matters in-house," the source said, adding the company was also unlikely to draw on outside experts as it reviews investment plans and steps up cost savings to help meet the cost of the scandal.

UBS analysts have estimated Volkswagen could face a bill of around 35 billion euros ($40 billion) to refit cars, pay regulatory fines and settle lawsuits, though they also say this is more than factored into the stock price after its plunge.

The crisis has been a major embarrassment for Germany, which has for years held up Volkswagen as a model of the country's engineering prowess and looks to the car industry as a source of export income and an employer of more than 750,000 people.

Economy Minister Sigmar Gabriel on Thursday urged Volkswagen to be pro-active in addressing its problems, but also said critics should not overstep the mark.

"There should not be a debate about the automotive industry or about diesel technology," Gabriel said after attending a meeting of Volkswagen's world workers council.

European carmakers rely heavily on diesel vehicles, which account for about a half of new sales in Europe compared with only a small fraction in the United States.

Horn, reaffirmed in his position by Volkswagen on Sept. 25, also said in his testimony Volkswagen had withdrawn its U.S. certification application for some model year 2016 vehicles over a software feature that should have been disclosed to regulators as an auxiliary emissions control device.

(Additional reporting by Reuters bureaus; Writing by Mark Potter; Editing by Sonya Hepinstall)

RELATED: History of Volkswagen

21 PHOTOS
History of Volkswagen
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US chief knew Volkswagen could be breaking emissions rules 18 months ago
circa 1950: Rows of ' Beetle ' cars at a German Volkswagen plant. (Photo by Fox Photos/Getty Images)
View of a Volkswagen Beetle, 1960s. (Photo by Hulton Archive/Getty Images)
circa 1975: Volkswagen Beetle cars parked. (Photo by Keystone/Getty Images)
DETROIT, UNITED STATES: Members of the media surround the new Volkswagen Beetle after its introduction 05 January at the North American International Auto Show in Detroit, Michigan. The Beetle, the best selling car in history, is being offered on the US market after a 19 year absence. AFP PHOTO/Matt CAMPBELL (Photo credit should read MATT CAMPBELL/AFP/Getty Images)
The New 1999 Beetle From Volkswagon. The Trademark Beetle Body Shape Is Immediately Recognizable, Though It Shares No Parts With The Old Beetle. It's Both Larger (161.1 Inches In Length And 96.3 Cubic Feet Inside) And More Powerful Than Its Predecessor And The Engine Is No Longer In The Back. The Car Is Available With A New Turbocharged 150-Horsepower 1.8-Liter Four-Cylinder Engine, A 115-Horsepower 2.0-Liter Four-Banger Or A High-Tech Turbo Direct Injection Diesel Engine That Gets 48 Mpg On The Highway And Has A Driving Range Of 700 Miles. The New Beetle's A Truly Modern Volkswagen, With A Fully Galvanized Body And German Engineered Suspension. Plus A Security System, Airbags* And 6-Speaker Cassette Stereo. (Photo By Getty Images)
NUERBURGRING, GERMANY - OCTOBER 07: INTERNATIONALES ADAC EIFFELRENNEN 2000 Nuerburgring; VW NEW BEETLE CUP (Photo by Christof Koepsel/Bongarts/Getty Images)
384066 02: FILE PHOTO: The new Volkswagen 'Microbus' concept vehicle is displayed for this publicity photo. The Microbus was introduced January 7, 2001 at the North American International Auto Show in Detroit, MI. (Photo courtesy of Volkswagen/Newsmakers)
398508 01: UNDATED FILE PHOTO A redesigned Volkswagen Beetle is displayed in this undated file photograph. Volkswagen officially opened a new assembly hall near Dresden, Germany, December 11, 2001 to produce the new Phaeton luxury car, which represents a dramatic new step for the German car company away from its traditional medium and small car market. (Photo courtesy Volkswagen AG/Getty Images)
A worker walks past a Polo car at a production line in Shanghai Volkswagen Automotive Company, 09 June 2003. One out of every 120 Chinese now own their own car as the government announced that there were more than 10 million privately owned cars plying Chinese roads, state press said. AFP PHOTO/LIU Jin (Photo credit should read LIU JIN/AFP/Getty Images)
SYDNEY, AUSTRALIA - OCTOBER 16: The Volkswagen Golf R32 on display during the Sydney International Motorshow at the Sydney Exhibition Centre October 16, 2003 in Sydney, Australia. The Sydney International Motorshow is the largest collection of automobiles on show in Australia with sixty new production models unveiled and concept vehicles on display. (Photo by Cameron Spencer/Getty Images)
DETROIT - JANUARY 5: Volkswagen displays the Concept T vehicle at the North American International Auto Show January 5, 2004 in Detroit, Michigan. The show, which will feature more than 700 vehicles, opens to the public January 10. (Photo by Bryan Mitchell/Getty Images)
ZOUERAT, MAURITANIA: Finnish Juha Kankkunen drives his Volkswagen Touareg 05 January 2005, during the sixth stage of the 27th Dakar Rally between Smara and Zouerat in Mauritania. Reigning champion Stephane Peterhansel of France won the stage. Peterhansel, hampered by a cold for two days, crossed the finishing line in 4hr 0min 29sec to beat out fellow Mitsubishi driver, and two-time champion, Hiroshi Masuoka of Japan by 5min 58sec and the Volkswagen of Bruno Saby by 7min 26sec. AFP PHOTO MARTIN BUREAU (Photo credit should read MARTIN BUREAU/AFP/Getty Images)
A line of 2006 Volkswagen Jetta GLI sedans sits on the lot of a Volkswagen dealership in the west Denver suburb of Lakewood, Colo., on Thursday, June 29, 2006. High gas prices continued to pull down sales by domestic automakers in June, while Toyota Motor Corp. credited the company's 14.4 percent sales boost to its many fuel-efficient offerings. (AP Photo/David Zalubowski)
Chinese men look at Volkswagen cars on a sales yard in Beijing in this March 31, 2006 file photo. (AP Photo/Greg Baker, File)
Unsold 2007 New Beetles sit in a long row on the back lot of a Volkswagen dealership in the west Denver suburb of Lakewood, Colo., on Tuesday, April 17, 2007. Volkswagen of America Inc. on Friday, June 1, 2007 reported U.S. sales rose 6.3 percent in May 2007 compared with May 2006, according to Autodata Corp. (AP Photo/David Zalubowski)
WOLFSBURG, GERMANY - MARCH 13: (L-R) Volkswagen Board members Detlef Wittig, Francisco Javier Garcia Sanz, Horst Neumann, Martin Winterkorn, Chairman of German automaker Volkswagen, Jochem Heizmann and CFO Hans Dieter Poetsch pose at the new Volkswagen model 'Scirocco' during the company's annual press conference on March 13, 2008 in Wolfsburg, Germany. The Volkswagen Group significantly increased its earnings last year. Profit before tax therefore grew to 6.5 billion euros. (Photo by Andreas Rentz/Getty Images)
A new 2010 Volkswagen Beetle convertible, right, is seen at the Los Angeles Auto Show in Los Angeles on Thursday, Nov. 20, 2008. The 2010 model will go on sale in Spring 2009. (AP Photo/Damian Dovarganes)
A SEAT Cupra is shown during the Volkswagen Group Night held in China's National Aquatic Center, also known as the "Water Cube", in Beijing, Sunday, April 22, 2012. (AP Photo/Alexander F. Yuan)
Volkswagen introduces the Golf R SportsWagon during the Los Angeles Auto Show on Wednesday, Nov. 19, 2014, in Los Angeles. The annual event is open to the public beginning Nov. 21. (AP Photo/Chris Carlson)
The new Volkswagen Passat is displayed during a reveal event at the Brooklyn Navy Yard, Monday, Sept. 21, 2015, in New York. (AP Photo/Kevin Hagen)
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