Volkswagen (VW) has agreed to spend $14.7 billion to get hundreds of thousands of emissions-cheating diesel vehicles off US roads and placate regulators, in settlements that would set a US auto-industry record but still leave VW facing criminal and civil complaints on three continents.
Under the agreement announced yesterday, which still required a judge’s approval, car owners would have the choice of having Volkswagen buy back their vehicles or install whatever pollution-control retrofit is eventually accepted by regulators.
In either case, the owners would get $5,100 to $10,000 each in additional compensation. Some leaseholders would receive roughly half those amounts.
VW would also have to pay $2.7bn to federal and California regulators for a trust to fund pollution-reduction projects and also make a $2bn investment in clean technology.
“This historic agreement holds Volkswagen accountable for its betrayal of consumer trust,” said Elizabeth Cabraser, the lead counsel for the plaintiffs.
The settlement marks a swift resolution between VW and the US, after the car maker admitted last September to systematically rigging environmental tests since 2009 to hide that its diesel vehicles were emitting far more pollutants than allowed under US and California law.
It also starts a clock for VW to get hundreds of thousands of vehicles fixed or removed from the road.
The record settlement raises questions about whether VW would need to devote more than the €16.2bn (Dh65.8bn) it has set aside to cover the cost of repairs, fines and legal fees. “It will take a long time to determine the full cost of the scandal,” said Frank Biller, a Stuttgart-based analyst at LBBW Bank.
“Now it looks as if we might be able to close this chapter, and if that were to be true, it would remove some uncertainty.”
Mr Biller estimates the total price tag to exceed €26.5bn, including potential litigation costs in other countries.
Indeed, the agreements, while advance Volkswagen’s efforts to eventually move beyond its costly diesel-cheating scandal, still leave unresolved other lawsuits on three continents and criminal probes in the US, Germany and South Korea.
The settlement requires VW to get 85 per cent of the cars recalled by June 30, 2019.
If it fails to do that, it will have to pay $85 million more into the environmental mitigation trust for each percentage point of the shortfall.
It will also have to pay an additional $13.5m into the trust for each percentage point it falls below the 85 per cent target in California.
VW owners can continue to drive their vehicles for now, even if they wouldn’t pass state emissions testing.
Individual states may require approved emissions fixes on these vehicles in the future.
Owners who choose the buy-back option would receive their cars’ trade-in value as of last September, just before VW’s admission, plus the compensation payments.
The agreement covers a half million 2.0-litre engines but leaves claims related to about 80,000 3.0-litre engines for further negotiations.
Also yesterday, Volkswagen reached a companion agreement with the Federal Trade Commission.
It is expected to announce a $400m settlement with states, including New York, to resolve their consumer and environmental claims.
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