BERLIN/WASHINGTON (Reuters) -- Volkswagen Group is struggling to agree with U.S. authorities on a fix for vehicles capable of cheating emissions tests, a VW source said, showing how relations between the two sides remain strained four months after the scandal came to light.
VW will hold further talks with the Californian Air Resources Board this week and with the U.S. Environmental Protection Authority (EPA) next week, and still hoped to reach a solution by a mid-January deadline, the source said on Tuesday.
But finding a fix was proving more difficult than expected, in part because this involved producing new components which then required testing, said the person, who declined to be named as the talks are confidential.
The difficulties highlight the lack of progress VW has made in winning back the confidence of U.S. regulators and drivers almost four months after it admitted to cheating diesel emissions tests and promised to turn over a new leaf.
On Monday, the U.S. Justice Department said it was suing Europe's biggest carmaker for allegedly violating environmental law.
The move threw VW's U.S. problems back into focus after it seemed to be recovering ground in Europe. VW announced last month it had agreed simple fixes for 8.5 million affected vehicles in Europe, and sharply lowered the number of cars affected by a separate understatement of carbon dioxide emissions.
"The announcement serves as a reminder/reality check of VW's still unresolved emissions issues," Goldman Sachs analysts said of the lawsuit.
VW CEO Matthias Mueller is expected to meet EPA representatives and politicians in Washington next week after visiting the Detroit auto show, the VW source said, on what will be Mueller's first trip to the U.S. since the scandal broke in September.
VW declined to comment on the progress of talks with the EPA, on whose behalf the U.S. Justice Department filed the lawsuit, or on Mueller's plans.
The lawsuit in effect claims up to $48 billion in damages. According to a Reuters review of the U.S. complaint, VW could in theory face fines of as much as $37,500 per vehicle for each of two violations of the law; up to $3,750 per "defeat device"; and another $37,500 for each day of violation.
U.S. lawsuits are typically settled at a fraction of the theoretical maximum. Goldman has estimated the likely costs at 500 million euros ($534 million).
A senior U.S. Justice Department official said the judge was not expected to rule that every car should be charged for all four counts, but said the department had set the bar high, knowing it would come down. Another senior departmental official said a settlement would likely be "in the billions," without elaborating. Both officials declined to be named.
The Justice Department said in its complaint it was seeking "appropriate steps" from VW to make nearly 600,000 vehicles compliant with U.S. emissions rules. "Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors," said Assistant Attorney General John C. Cruden for the Justice Department's Environment and Natural Resources Division.
U.S. automakers 'favored'
The deputy parliamentary leader for German Chancellor Angela Merkel's conservatives, Michael Fuchs, said that the hard line taken by U.S. authorities against Volkswagen could give U.S. automakers a boost at the expense of their German rivals.
"Due to the massive claims against VW that are now out there, I'm starting to suspect that the American authorities are running the risk of pursuing an aggressive industrial policy that favors the U.S. automobile industry to the detriment of our German automobile industry," Fuchs told Reuters.
German politicians expressed concern that a hefty U.S. fine could hit jobs. VW employs around 270,000 people in Germany.