Volkswagen has agreed to pay out $14.7 billion in a US settlement over its emissions-cheating diesel-powered cars, pledging to buy back or fix cars that tricked pollution tests, and pay each owner up to $10,000 in cash.
The huge settlement filed in federal court Tuesday gives the first indication of the financial cost to the German auto giant of the months-long scandal unfolding on both sides of the Atlantic over its fraudulent practices.
Under the deal, Volkswagen agreed to create a pool of $10 billion to compensate owners and pay a $2.7 billion environmental penalty that will help remediate pollution around the United States.
The company will invest an additional $2.0 billion ‘to create infrastructure for and promote public awareness of zero emission vehicles,’ the court filing showed.
The settlement, which must be approved by a federal judge in San Francisco who is overseeing the litigation, could affect some 480,000 owners of Volkswagens and Audis with 2.0-liter diesel engines.
Deputy US Attorney General Sally Yates told a news conference the investigation is not yet over.
‘This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public's trust,’ she said.
‘And while this announcement is an important step forward, let me be clear, it is by no means the last. We will continue to follow the facts wherever they go.’
Yates noted that the settlement does not cover civil penalties for violations of the Clean Air Act or a criminal investigation. The deal does not affect a parallel probe into the company's 3.0-liter diesel engines.
- 'Can't undo damage' -
She said however the deal would offer compensation to consumers and help remediate air pollution.
‘We can't undo the damage that Volkswagen caused to our air quality but what we can do is offset that damage by reducing pollution from other sources,’ she said.
Volkswagen admitted in September that it had installed software in the vehicles that tricked US emissions tests into showing the cars met environmental standards.
The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.
The device switched off after testing, enabling the vehicles to spew up to 40 times the permitted amounts of nitrogen oxides.
Volkswagen -- which had an annual turnover of 210 billion euros for 2015 -- has set aside 16.2 billion euros ($17.9 billion) to cover costs from the scandal including the legal risks.
The auto giant is facing similar charges and litigation in Europe and elsewhere for the same issues.
Tuesday's settlement filed with Judge Charles Breyer would settle claims from the US government as well as a large number of plaintiffs including owners, lessees and dealers.
Volkswagen agreed under the deal to buy back the emissions-cheating vehicles at their market prices before the scandal broke late last year, at prices ranging from $12,475 for the 2009 Jetta Sedan to more than $44,000 for some 2015 Audi models.
The owners also have the option of letting Volkswagen modify the cars to meet US pollution standards, if a fix is approved by environmental officials.
In either case, the owners would also get a cash settlement ranging from $5,100 to $10,000 depending on the vehicle.
The deal also allows consumers who leased one of the affected vehicles to have the lease terminated at no cost, and calls for Volkswagen to pay off loans still owed by some owners.
‘Consumers who were cheated by Volkswagen's deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them,’ said Federal Trade Commission chair Edith Ramirez.
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