Terms of VW's $15 billion in U.S. settlements for cheating scandal announced
WASHINGTON -- Volkswagen’s decision to cheat on the 2.0-liter diesel vehicles it made the cornerstone of its U.S. vehicle lineup will cost the company nearly $15 billion in far-reaching settlements with purchasers of those cars and the U.S. government.
Included in the settlements, announced by U.S. officials Tuesday, are $10 billion for customer buybacks, early lease terminations and customer restitution payments, according to a summary filed in U.S. District Court in San Francisco, which is overseeing the VW litigation.
Following what Deputy U.S. Attorney General Sally Yates called “one of the most flagrant violations of environmental and consumer laws in our country’s history,” each owner of an affected diesel will get the repurchase price of their vehicle plus $5,100 to $10,000 depending on the model and year. Lessees who terminate their leases early will receive half of what an eligible owner would receive for an equivalent vehicle.
In addition, VW will deposit $2.7 billion in a trust to fund environmental programs nationwide to reduce nitrogen oxide emissions. VW also is required to spend $2 billion to “promote” zero emission vehicles such as battery-electric or hydrogen fuel cell vehicles, in addition to what the company has already earmarked for investment into the technologies, according to the summary.
“Using the power of the Clean Air Act, we’re getting VW’s vehicles off the road and we’re reducing harmful pollution in our air pollution that never should have been emitted in the first place,” EPA Administrator Gina McCarthy said.
Also on Tuesday, VW announced a separate settlement with at least 44 U.S. states, the District of Columbia and Puerto Rico that will cost at least $600 million.
In Germany the prime minister of the state of Lower Saxony, VW's second-largest shareholder after the Porsche-Piech families, reacted positively to the news.
"This is a significant step forward in addressing the exhaust gas crisis," Stephan Weil said in a join statement with Lower Saxony Economy Minister Olaf Lies on Tuesday. "Should the court accept this settlement at the end of July, significant civil litigation could be completed in the United States. The positive aspects of these settlement agreements predominate, despite the considerable financial burden associated."
The settlements come after months of intense negotiations overseen by former FBI Director Robert Mueller between Volkswagen, U.S. officials and attorneys representing owners of the affected VW diesels. Parts of the agreement were leaked to the media last week.
Under pressure from the EPA, the automaker admitted last September that it had rigged 2.0-liter diesels with software to mask harmful nitrogen oxide emissions during U.S. government lab tests since the 2009 model year, affecting some 500,000 vehicles here. The company later admitted that about 11 million vehicles worldwide had the illegal “defeat device” software, plunging it into an epic scandal that has tanked its stock price and put the company under siege from angry shareholders, regulators, customers and dealers.
Members of the public may comment on the proposed settlements after the documents are filed in federal court. A preliminary approval hearing for the consumer class-action settlement is scheduled for July 26.
The settlements mark a key turning point in the prolonged saga following the disclosure of VW’s rigged diesel violations, freeing the automaker from nine months of near silence. Ongoing investigations by the EPA and Department of Justice and, more recently, a court-imposed gag order have barred VW from publicly discussing the matter in-depth.
Meanwhile the company has faced an assault from investors, vehicle owners, municipalities as well as regulatory and criminal investigators in the U.S., Germany and other parts of the world.
The settlements filed Tuesday, however, don’t resolve all claims stemming from the diesel crisis. VW still must reach an agreement with regulators on whether it will offer to buy back 85,000 larger 3.0-liter Porsche, Audi and VW cars and SUVs that emitted up to nine times legally allowable pollution and how much it may face in civil fines for admitting to violating the Clean Air Act. A deal covering the 3.0-liter vehicles still could be months away.
Tuesday’s settlements also do not include claims from investors, bondholders and individual consumers who have sued outside of the San Francisco federal court, and VW’s U.S. dealers.
VW’s U.S. dealers have seen the value of their stores sink amid a freeze on all new and certified diesel vehicle sales imposed shortly after the violations were made public in September. Customers are growing frustrated with the protracted blackout on information about what to do with their vehicles. VW’s U.S. sales were down 13 percent through May.
A committee of six VW dealers was organized in March on behalf of VW’s 652 U.S. dealerships to attempt to recoup financial damage to dealerships caused by the emissions scandal.
VW agreed in May to begin the talks, but it’s unclear what has transpired since. Jason Kuhn, president of Kuhn Automotive Group of Tampa, Florida, and chairman of the dealer negotiating committee, declined to discuss the talks, citing a confidentiality agreement.
The automaker planned to host a conference call with dealers this afternoon to discuss the settlements and customer communication strategies, according to dealers planning to participate in the call.
Alan Brown, chairman of VW’s dealer council, said that the settlements represent the first signs of “closure” since the scandal broke last autumn.
“You can’t begin to heal until you have closure,” he said.
Reuters and Chrisitiann Hetzner contributed to this report