VW got €4 billion in EIB clean technology loans

30 September 2015, Politico

The Volkswagen Group received more than €4 billion in loans from the European Investment Bank over the last decade, with much of the money going to research aimed at developing cleaner engines.

The world’s largest carmaker is embroiled in a global scandal after installing so-called defeat devices in 11 million of its diesel cars to cheat on emissions standards tests, a scandal that has cost the CEO his job, opened the company to a potential fine of $18 billion in the U.S., pummelled the stock price, and prompted investigations across Europe.

The company’s earlier efforts at portraying itself as an environmentally responsible carmaker lie in ruins. Dow Jones is dropping Volkswagen from its Sustainability indexes, which tracks companies that rank the best in their industries in terms of economic, environmental and social criteria. France is also planning to ask the German carmaker to repay subsidies the government gave people buying “clean” vehicles.

The EIB, a lender owned by EU countries, issued Volkswagen and its subsidiary brands 17 loans between 2005 and 2015, according to data compiled by non-government organization CEE Bankwatch and verified by POLITICO.

Over €1.1 billion went to truck and bus maker Scania between 2008 and 2013 to support research and development into a “new range of low emission engines,” as well “clean engine and hybrid technologies.” The EIB also lent €300 million to MAN Trucks for research aimed at improving the energy efficiency of trucks and buses.

Volkswagen itself received €400 million in loans in 2009 to support the development and market launch of greener and more fuel-efficient car components. It also borrowed €500 billion for a project described in the EIB database as “Innovative powertrains.”

The rest of the money went to Volkswagen operations in Argentina and India for the construction of new plants making light commercial vehicles.

Five of the projects fell under the EIB’s “climate action” category, CEE Bankwatch said.

Pay us back

Volkswagen still has €1.8 billion in EIB loans outstanding, while the rest has been repaid, a source said. The lender is in “active talks” with the carmaker to better understand if any of the bank’s loans have been misused.

“We are very concerned about the allegations, including indications by VW executives of improper and possibly criminal behavior,” said an EIB official.

CEE Bankwatch said the bank should have ensured that loan contracts have strong clauses preventing misconduct. “We expect the EIB … to make transparent how its loans were used by VW group, whether these loans really contributed to development of engines which meet agreed emission standards,” said Anna Roggenbuck, policy officer at CEE Bankwatch.

VW did not respond to POLITICO’s questions in time for publication.

French Energy Minister Ségolène Royal also said Wednesday that her government will ask Volkswagen to reimburse the cost of state subsidies paid out for the purchase for green vehicles. The French government offers the buyers of electrical, hybrid or low-emissions diesel vehicles bonuses of up to €10,000.

Of the 11 million Volkswagen vehicles with tampered emissions controls sold around the world, nearly 950,000 were sold in France. Royal said that not all had been purchased with state subsidies, as some sales predated the scheme.

“We are making an inventory of the bonuses paid over the last several years and of the reimbursements that we will request depending on the fraud that may have been committed,” she said.

Nicholas Vinocur contributed to this article