By Rory Carroll
SACRAMENTO (Reuters) - California may allow partially-repaired Volkswagen (DE:VOWG_p) diesel cars implicated in the company's emissions scandal to continue operating on its roads because a full fix may not be possible, the state's air regulator said at a legislative hearing on Tuesday.
California is home to more than 82,000 Volkswagen cars equipped with "defeat devices" that allow the cars to pass laboratory emissions tests despite exceeding federal standards by up to 40 times when they are driven on roads.
"Our goal has been to fix the vehicles and return them to their certified configuration as expeditiously as possible," said Todd Sax, chief of the California Air Resources Board enforcement division. "Unfortunately, this may not be possible."
He said he does not believe there is a fix available that would allow the cars to comply with either the emissions standards or the onboard diagnostic requirements.
"We will have to decide what the best approach is to dealing with these vehicles, and one of the options potentially would be to accept something less than a full fix," he said.
That could be good news for the embattled company, which could potentially avoid a costly buyback of its older car models while it tries to negotiate a settlement with the state.
Sax said if the option was taken up, Volkswagen would need to pay to mitigate the harm caused by allowing the vehicles to continue to operate on the road.
He stressed that no decision has yet been made and said discussions with Volkswagen are ongoing.
Sax said he is hopeful that Volkswagen would be willing to settle the case, but said the state is willing litigate if a settlement is not reached.
Volkswagen declined to participate in Tuesday's hearing.
State Senator Jim Beall said allowing partially-repaired cars to continue driving on California roads raised several "moral dilemmas."
He said he was concerned that Volkswagen may resell cars that it buys back from California customers into other, less regulated markets.
He also questioned whether it was fair to California consumers that the value of their diesel cars has fallen sharply while any financial relief could still be a long ways off.
"The moral dilemma will hang over this as long as we don't have a solution," he said. "It will not bode well for the state of California or Volkswagen at all if this drags out because as it drags out, people will be harmed further."