Buyback offers and a possible repair are on the table after Volkswagen AG and the US Justice Department reached a deal “in principle” to deal with excess emissions in nearly 600,000 diesel vehicles, a federal judge said on Thursday (21 April).
According to a Reuters report, US Judge Charles Breyer said the settlement was expected to include a buyback offer for nearly 500,000 two-litre vehicles and a possible fix if regulators agree on it. The settlement would include an environmental remediation fund and additional compensation to owners to sell back or have vehicles fixed.
The government and Volkswagen have until late June to complete a final “consent decree” that will face public comment before taking effect, Reuters said.
Volkswagen confirmed in a statement it had reached an agreement with US authorities.
“In connection with the diesel issue, Volkswagen AG confirms that an agreement in principle with the Department of Justice (Environmental Division), the Environment Protection Agency (EPA), and the California Air Resources Board (CARB), with the full involvement of the Federal Trade Commission (FTC), has been reached in the United States. This agreement in principle will be incorporated into binding consent decrees by the Department of Justice and the FTC in the coming weeks.
“Furthermore, Volkswagen has reached an agreement on the basic features of a settlement with the class action plaintiffs in the lawsuit in San Francisco. This agreement will be incorporated into a comprehensive settlement in the coming weeks.
“The judge presiding over today’s court hearing in San Francisco, Charles R. Breyer, expressly welcomed this development.
“The arrangements in the making in the United States will have no legal bearing on proceedings outside of the United States.
“Ongoing investigations by the Department of Justice, Criminal Division, and the State Attorneys General are not prejudiced by these agreements in principle.”
The agreement follows the discovery of ‘cheat’ devices in 600,000 VW diesel cars last year.
Michelle Krebs, senior analyst at Autotrader, said: “A federal judge’s blessing of Volkswagen ‘s framework of a plan to take care of its customers is a long-awaited first step, but much more work needs to be done to flesh out the details in the coming months. Indeed, it is a fairly sketchy framework at this point. Meantime, Volkswagen customers will have to stay patient a bit longer until all of the details of the compensation deal are hammered out. Then they will have to carefully weigh all of their options, which include having Volkswagen buy back their cars, have them repaired if that is possible, or return their lease cars.”
Kelley Blue Book senior analyst Karl Brauer said: “The nature of Volkswagen ‘s diesel issue is reflected in this initial, complex ruling by the US legal system. There will be no ‘simple fix’ because the vehicles involved cover a broad spectrum of models and production years. This is only the first step in a long road to final resolution. Volkswagen ‘s diesel customers now have a sense of what their options will be, but numerous details need to be finalised.
“Volkswagen ‘s total costs remain clouded, but beyond customer restitutions we know the company will have to fund various environmental efforts to offset emissions violations.”
KBB’s Rebecca Lindland added: “I believe this is the first time in the history of defeat device cases that the consumer will be compensated. Prior violations all were resolved through fines and penalties to the manufacturers. This could set a new precedent for these kinds of violations.”
Judge Breyer had last March given VW until today to announce a “concrete proposal” for taking the affected vehicles off the road. He said at the time the proposal could include a vehicle buyback plan, or a repair approved by US regulators that allowed the cars to remain on the road.
Also In March, VW CEO Matthias Mueller has said a deal with US authorities over its emissions scandal could take longer and cost more than expected. He had warned the EUR6.7bn (GBP5.2bn) set aside to cover the costs of the scandal might not be enough.
Earlier this week, citing a report in German newspaper Handelsblatt, Reuters reported that Audi created emissions test ‘defeat devices’ in 1999 but never used them, years before parent Volkswagen did use them to cheat diesel emissions tests.
VW last September admitted it had manipulated the engines of around 11m diesel cars across its VW, Audi, Porsche, Skoda and Seat brands.
Audi engineers developed software capable of turning off certain engine functions in 1999 but it was never used by the division, the newspaper told Reuters in an advance of an article due to be published on Wednesday (20 April) which cited industry and company sources.
Six years later, when VW engineers at the firm’s Wolfsburg headquarters were unable to bring nitrogen oxide emissions below legal thresholds, they started to install the software developed by Audi, Handelsblatt reportedly said.
VW and Audi both declined to comment to Reuters on the report, citing ongoing investigations by US law firm Jones Day into the diesel emissions scandal. VW has said Jones Day would publish a “substantial report” on its findings by the end of April.
VW’s supervisory board is due to discuss the potential costs of the emissions scandal and approve 2015 earnings on Friday (22 April).