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VW emissions offer goes down well in US

By Graeme Roberts | 29 June 2016

Volkswagen's settlement agreements with various parties in the US have been generally well received by several key consumer advice buying publications in the country but appear unlikely to sit so well with European regulators because no similar deal is on the table this side of the Atlantic.

The automaker said it had set aside US$15bn  - US$10bn for buybacks and US$5bn to offset excess diesel emissions and invest in electrification and cleaner tech. Of approximately 499,000 two-litre TDI vehicles produced for sale in the United States, approximately 460,000 Volkswagen and 15,000 Audi vehicles are currently in use and eligible for buybacks and lease terminations or emissions modifications, if approved by regulators.

Karl Brauer, senior analyst at Kelley Blue Book, said: "At nearly tenfold the cost of recent payouts by GM [ignition switch - ed] and Toyota [unintended acceleration] this one should hold the record for most expensive automotive settlement for quite some time. While undoubtedly a painful pill for VW's accountants and stockholders to swallow it's also the most comprehensive and customer-friendly resolution I've ever seen. Not only will VW diesel owners have multiple compensation options but the company will also fund environmental efforts and advanced clean air technology to offset its excessive diesel emissions.

"It's a huge step toward resolving the issue, though many legal hurdles remain, as does finding a resolution for VW's customers in markets outside the US."

Last weekend, European industry commissioner Elzbieta Bienkowska said VW should pay its German customers similar compensation to US buyers.

She reportedly told Welt am Sonntag newspaper: "Volkswagen should voluntarily pay European car owners compensation that is comparable with that which they will pay US consumers."

Michelle Krebs, senior analyst at Autotrader, said: "Volkswagen's proposed settlement is unprecedented in its dollar amount, but the situation was unprecedented, in that it was not a mistake but a deliberate deception. The question remains which option will consumers select."

Her colleague, Rebecca Lindland, added: "It's a huge settlement for any company, especially involving a non-fatal issue. But this has dragged on long enough and the sooner VW puts this behind them, the better. They need to concentrate on launching the product-led renaissance that will revitalise the brand and its reputation."

Edmunds.com's director of industry analysis, Jessica Caldwell, said: "Volkswagen has to swallow a $15bn pill but it needs to take this medicine in order to move on. This massive financial hit won't magically make VW's troubles disappear overnight, and it still has a long road ahead to repair its reputation among car shoppers. The company got a head start earlier this month by announcing a long-term commitment to electrification, but it will be a long time before shoppers will trust VW as an environmentally friendly brand. The good news is that history is on Volkswagen's side. Other automakers have successfully weathered their own high-profile scandals and VW has the resources and infrastructure in place to do the same."