Volkswagen's Emissions Fix Approved For Some Models

Volkswagen (DE:VOWG_p) AG (OTC:VLKAY) has received approval from the German motor vehicle agency, KBA to recall and repair 800,000 of its vehicles, per sources. This will be a significant step undertaken by the company toward solving its emissions problem.

Last year, Volkswagen found itself in troubled waters after the Environmental Protection Agency (“EPA”) revealed that the company had developed a software algorithm to deceive U.S. emission tests. Volkswagen admitted to its diesel vehicles being installed with software that makes the engines appear to have low emission levels during tests. According to the EPA, these Volkswagen vehicles emit nitrogen oxides, or NOx, at almost 40 times the standard amount. Nitrogen oxide emissions lead to smog and acid rain, and can cause serious health concerns like lung cancer.

Almost 11 million vehicles around the world – including Jetta, Beetle, Audi A3 and Golf from model years 2009–2015, and Passat of model years 2014 and 2015 – are fitted with this software. In Europe, around 8.5 million vehicles were detected with the software.

Volkswagen planned to start repairing the affected 2.0-liter diesel-powered Passats vehicles in March. However, the recall of these vehicles was delayed as the KBA was reviewing the impact of the repair on fuel efficiency. KBA has now confirmed that the repair will not affect the fuel consumption, performance or noise levels of the vehicles.

Approvals for repairing the vehicles have been granted for European versions of the Volkswagen Passat, CC coupes and Eos convertible models with 2-liter engines. These vehicles can be repaired simply by updating the software which controls the emissions system. However, the recall of the Passats that feature 1.2-liter diesel engines is still held up. Volkswagen is also awaiting approval for other models with affected 2.0-liter engines.

The automaker will start notifying European owners of the affected vehicles. These vehicles will be repaired at local Volkswagen workshops free of charge. In addition, the customers will be offered alternative transportation free of cost.

Volkswagen currently carries a Zacks Rank #2 (Buy).

Stocks that Warrant a Look

Some other well-ranked automobile stocks include Lear Corp. (NYSE:LEA) , Oshkosh Corporation (NYSE:OSK) and Superior Industries International, Inc. (NYSE:SUP) . All these stocks sport a Zacks Rank #1 (Strong Buy).

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