BackVolkswagen to pay $14.7 billion in US diesel emissions settlement
The settlement marks a swift resolution between Volkswagen and the US, after the carmaker admitted last September to systematically rigging environmental tests since 2009
PremiumPhoto: Markus Schreiber/AP
San Francisco/Detroit/Washington: Volkswagen AG 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 set a US auto-industry record but still leave VW facing criminal and civil complaints on three continents.
Under the agreement announced on Tuesday, which still requires a judge’s approval, car owners will 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 will get $5,100 to $10,000 each in additional compensation. Some leaseholders will receive roughly half those amounts.
VW will also have to pay $2.7 billion to federal and California regulators for a trust to fund pollution-reduction projects and also make a $2 billion 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 carmaker 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 will need to devote more than the €16.2 billion ($17.94 billion) 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."
Biller estimates the total price tag to exceed €26.5 billion ($29.36 billion), 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% of the cars recalled by 30 June, 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 $13.5 million into the trust for each percentage point it fall below the 85% 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 buyback option will 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-liter engines but leaves claims related to about 80,000 3.0-liter engines for further negotiations.
Volkswagen on Tuesday reached a companion agreement with the Federal Trade Commission. It is also expected to announce a $400 million settlement with states, including New York, to resolve their consumer and environmental claims, a person familiar with the matter said. Bloomberg
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
