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VW faces reforms, oversight for three years under U.S. settlement

FILE PHOTO - A U.S. flag flutters in the wind above a Volkswagen dealership in Carlsbad, California, U.S. May 2, 2016. REUTERS/Mike Blake/File Photo

By David Shepardson

WASHINGTON (Reuters) - Volkswagen AG, as part of a $4.3 billion settlement with U.S. regulators, on Wednesday agreed to sweeping reforms, new audits and oversight by an independent monitor for three years to resolve diesel emissions cheating investigations.

Under the settlement of charges it installed secret software in U.S. vehicles to allow them to emit up to 40 times legally allowable pollution, the German automaker agreed to change the way it does business in the United States and around the world.[nL1N1F10UD]

VW will separate the jobs of product development and certification and testing and monitoring into different organizations.

U.S. regulators said the reforms, which come after President-elect Donald Trump criticized the Environmental Protection Agency (EPA) for over-regulating U.S. industries, were an example of why vigorous environmental enforcement was needed.

"There are some structural changes that we are requiring so there is less ability for these types of things to happen," EPA Administrator Gina McCarthy told reporters on Wednesday.

VW will plead guilty to three felonies and be on probation for three years.

In addition to oversight by an independent monitor, the company will also face separate annual environmental management systems audits over the next three years.

VW said in a statement Wednesday that its emission tests are now evaluated externally and independently. It said most of the reforms required by the settlement would apply to VW operations globally.The company said it looked for any indications "that a defeat device may be present-before a model receives technical approval" and those tests were conducted by a different department than the one that was or is responsible for developing the vehicle.

VW must test all of its U.S. vehicles over the next three years using portable emissions measurement system testing - a method designed to capture real world emissions and deter cheating. It must also provide new protections for whistleblowers.The company's Porsche unit will face separate audits and vehicle testing requirements.

McCarthy said the actions were needed to "level the playing field for all the responsible companies who always do the right thing."

"Markets like this don't manage or police themselves," she said.

VW must within three months create a group steering committee for monitoring and complying with U.S. vehicle emissions laws and add new environmental protection provisions to its employee code of conduct.

VW faces fines of up to $50,000 a day if it fails to comply with some requirements - and up to a $1 million penalty if they make false statements to regulators.