German automaker Volkswagen has agreed to pay as much as $15.3 billion after the company admitted to cheating on emissions testing in the U.S. over the span of years. The proposed agreement will resolve the Volkswagen class action lawsuits filed in response to the emissions scandal. Formally submitted by the Justice Department on Tuesday, the landmark Volkswagen settlement represents the largest vehicle buyback offer in United States history.
Details of Volkswagen Settlement
Last September, Volkswagen admitted publicly to installing software in certain diesel engine models that strictly limited emissions when vehicles were being tested in a laboratory setting. When the same vehicles were outside of an emissions testing environment, they spewed up to 40 times the allowable levels of emissions.
According to Deputy Attorney General Sally Yates, VW’s wrongdoing amounted to the “most flagrant violations of our consumer and environmental laws in our country’s history.” Yates added that it isn’t possible to undue air quality damage, but we can offset the damage.
As part of the Volkswagen settlement, the company has agreed to buy affected vehicles back from consumers and provide funding for clean energy programs. Under the proposed agreement, VW will set aside roughly $10.033 billion that will go toward vehicle buybacks and repairs for the diesel engine vehicles that were installed with software designed to cheat emissions testing.
The Volkswagen settlement covers an estimated 475,000 vehicles in the U.S., including the following VW models:
- Volkswagen Beetle and Beetle Convertible (2013 – 2015)
- Volkswagen Golf 2-Door (2010 – 2013)
- Volkswagen Golf 4-Door (2010 – 2015)
- Volkswagen Golf SportWagen (2015)
- Volkswagen Jetta (2009 – 2015)
- Volkswagen Jetta SportWagen (2009 – 2014)
- Volkswagen Passat (2012 – 2015)
- Audi A3 (2010 – 2013, 2015)
The carmaker will also pay $2 billion over the span of 10 years to fund programs that promote the development of zero-emission ride sharing fleets, the construction of electronic vehicle charging infrastructure and other programs aimed at boosting sales of vehicles that do not run on fossil fuels. All of the programs are directed by the Environmental Protection Agency (EPA) and the state of California.
Additionally, VW will pay $2.7 billion within three years to the government and tribal agencies for the replacement of old buses or to fund new infrastructure at ports. This investment will be aimed at reducing diesel emissions.
The car company agreed to pay $600 million to 44 U.S. states, Washington D.C. and Puerto Rico in a separate Volkswagen settlement agreement.
Per the terms of the agreement, VW will be barred from reselling or exporting vehicles it buys back from U.S. consumers, unless the EPA approves a fix for them. The company will need to buy back or repair 85 percent of the affected vehicles in the U.S. by June of 2019 or face a fine of $100 million for every percentage point below the aforementioned figure.
All told, VW could pay as much as $15.3 billion for the emissions scandal. This amount doesn’t include the civil fine VW faces for violating the U.S. Clean Air Act, nor does it include potential criminal penalties.
VW Could Still Face Criminal Charges Stemming from Emissions Scandal
According to Reuters, Volkswagen could still face criminal charges for the emissions scandal, as well as oversight by an independent monitor. While as of now it is unknown what a VW criminal settlement would look like, a source familiar with Tuesday’s settlement proposal said VW will likely be hit with punishments similar to what General Motors Co. and Toyota Motor Corp. faced after auto safety settlements.
The criminal settlement, which is expected to be proposed in the coming months, will likely include measures to deter Volkswagen from engaging in similar behavior again.
Options for VW Owners in the United States
According to Volkswagen, the company expects to begin buying back vehicles in the U.S. starting in October, which is when a federal judge is expected to give final approval on the proposed Volkswagen settlement. The company will likely then begin to propose mechanical fixes starting in November. Some of the vehicle models listed above will require quite a lot of work.
The Volkswagen settlement buyback amount could end up being significantly less if U.S. regulators approve the fixes outlined by the company and owners decide to get their vehicles repaired.
Most VW owners will receive between $5,100 and $10,000 in compensation as part of the buyback program. This includes the pre-emissions scandal value of each vehicle. VW owners have until October of 2018 to decide whether they want to sell their vehicle back to Volkswagen or get their vehicle repaired.
Volkswagen Settlement Still to Come in Other Countries
Criminal charges abroad are also still very much in play for VW. The automaker faces criminal allegations in Germany and other nations around the world, as well as a number of lawsuits from investors who claim to have suffered losses after news of the emissions scandal broke.
Consumer advocacy groups in the European Union are calling for a similar Volkswagen settlement agreement to the one reached today in the U.S. For its part, VW has stonewalled claims for compensation in Europe, saying vehicles purchased there would not lose value, because technical fixes have been approved by regulators.