Volkswagen to buy back or repair nearly 600,000 vehicles in emissions scandal

American Eagle

The owners of nearly 600,000 Volkswagen vehicles rigged to cheat on emissions tests will have the option to have their cars fixed or bought back by Volkswagen, a judge said on Thursday.

Judge Charles Breyer did not give details on how much car owners would be paid but said the deal between Volkswagen, the US government and private lawyers would include “substantial compensation”. Last month, The senior US district judge threatened a trial if Volkswagen and US officials did not reach an agreement on timing of the repairs by Thursday.

“Volkswagen is committed to earning back the trust of its customers, dealers, regulators and the American public,” the company said in a statement. “These agreements in principle are an important step on the road to making things right. As noted today in court, customers in the United States do not need to take any action at this time.”

The agreement will include a fund for corrective efforts over the excess pollution, and Volkswagen will be required to commit other money to promote green automotive technology, said Breyer, who has not yet formally signed off on the deal.

US officials and VW have until 21 June to file preliminary proposals on the settlement. Before Breyer signs off on the final settlement, those affected will have a chance to weigh in during a public comment period.

The judge did not reveal whether it included details on how the company planned to repair the vehicles.

Volkswagen would spend just over $1bn to compensate owners but did not include plans on a vehicle fix in the agreement, a person briefed on the matter who asked not to be identified because the deal had not been made public said on Wednesday. Those plans, and the cost of the fixes, apparently are still under negotiation.

With $1bn to spend, it works out to about $1,700 per car. But some owners of newer models who get just a software fix may receive little. About 325,000 owners of older cars that require more extensive repairs likely will get more, because the repairs could affect mileage and performance.

The vehicle owners and the US Department of Justice sued the company after it acknowledged in September that it intentionally defeated emissions tests and put dirty vehicles on the road.

Analyst Marc-Rene Tonn at Warburg Research estimated the direct financial impact on Volkswagen from the emissions scandal worldwide at €28.6bn ($32.3bn). The company also faces losses from declines in market share and having to lower its prices to keep customers.

Volkswagen was originally set to hold its annual meeting on Thursday but had postponed it ahead of the latest legal ruling in the emissions scandal. The automaker had also delayed releasing its quarterly earnings, which were originally scheduled for 10 March. Both earnings and the annual report will be released a week after Thursday’s hearing, on 28 April.

VW’s works councils chairman, Bernd Osterloh, called on US lawmakers to consider the effects of financial penalties on the company’s workforce. “We very much hope that the US authorities also have an eye for this social and employment-political dimension,” he said a month ago.

Any US settlement could influence what happens in Europe and in other countries, according to Tonn. “Very generous payments to US customers may add to some greediness here, too,” he said.

Shares in Volkswagen were up 5.6% in early trading in Europe on news of a deal with the government.

Volkswagen told its shareholders last year it had set aside $7.3bn to help defray the potential costs of a recall or regulatory penalties. Most outside observers have said that figure is probably far too low. The company faces as much as $20bn in fines for Clean Air Act violations alone, before paying to fix the cars or compensate their owners.

“This is clearly not the end of VW’s legal and regulatory problems. Today’s hearing only covered civil issues with US vehicles and even as to those there are not many specifics but rather an agreement in principle,” said Carl Tobias, a law professor at the University of Richmond. “Consumers may be happy with that if it is generous enough and allows for buybacks.”

Tobias pointed out that there are still a number of outstanding issues in the US, including criminal liability and the ongoing investigation by the Department of Justice.

The court hearing on Thursday was also expected to touch on a request to add the Federal Trade Commission to the case. The FTC has sued Volkswagen, alleging deceptive advertising.

“For years Volkswagen’s ads touted the company’s ‘clean diesel’ cars even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests,” the FTC chair, Edith Ramirez, said last month. “Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”

The owners’ lawyers are also seeking documents that Volkswagen provided to the law firm Jones Day, which the company has hired to investigate how the cheating happened.

Associated Press contributed to this report.

Powered by article was written by Jana Kasperkevic in New York and agencies, for on Thursday 21st April 2016 18.05 Europe/ © Guardian News and Media Limited 2010


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