By Alexandria Sage and David Shepardson
Volkswagen AG, driving to move beyond a scandal that has disrupted its global business and sullied its reputation, announced a sweeping deal on Thursday to buy back or potentially fix about a half million polluting diesel cars and set up environmental and consumer compensation funds.
The settlement, which sources and analysts said could cost VW at least $10 billion, is not likely to end the Dieselgate controversy that began last September when the world’s No. 2 automaker admitted using sophisticated secret software in its cars to cheat exhaust emissions tests.
VW still faces an ongoing Justice Department investigation that could lead to criminal charges and an outcry in Europe to do more for millions of owners of vehicles there that also have illegal software to defeat emissions testing. US environmental activists said the deal did not go far enough.
The framework of the deal was hammered out by VW with the Justice Department, state of California, the US Environmental Protection Agency and Federal Trade Commission as well as lawyers for car owners who filed class action civil lawsuits. The deal is expected to settle more than 600 class suits in US courts.
Federal Judge Charles Breyer outlined the agreement during a hearing in a San Francisco courtroom. He did not disclose the amount of money involved, and ordered lawyers for all parties not to disclose details until they were final.
Judge Breyer set a deadline of June 21 to nail down the final details of the agreements, and many questions must be answered. Among them is whether Volkswagen will be allowed to resell repurchased vehicles and how to fix nearly 90,000 Porsche, Audi and VW cars and SUVs also made by the company that are equipped with six-cylinder diesel engines that do not comply with US clean air standards.
The judge said he expects the issues of Justice Department fines and resolving the 3.0 litre engines will be addressed “expeditiously.”
The judge said the settlement includes VW’s offer to buyback 482,000 2.0-liter vehicles, fix them if regulators agree on that step after further testing, or cancel outstanding leases.
The US settlement will include an environmental remediation fund to address excess emissions, and additional “substantial compensation” to owners to sell back or have their vehicles fixed, Breyer said. The size of the fund and the amount of the compensation to owners were not disclosed.
Outside the courthouse, Joyce Ertel Hulbert, owner of a 2015 diesel Golf station wagon, held up a sign reading “Invested $30,000, worth $00,000. Buy it Back!”
“They’re not doing enough,” she said of VW.
VW said in a statement it 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.”
VW said the deal “will have no legal bearing on proceedings outside of the United States.” VW previously offered $1,000 in cash and other compensation to nearly 600,000 U.S. owners, but did not offer compensation to other owners.
‘WINNING BACK THE TRUST’
“Volkswagen is committed to winning back the trust of its customers, its dealers, its regulators and all of America,” said VW lawyer Robert Giuffra.
Volkswagen has more miles to travel before the scandal is behind it. The Justice Department said its other investigations into VW’s conduct “remain active and ongoing.” Environmental and consumer groups said they are not convinced the deal goes far enough.
“Without strict penalties, and without fixing or removing the polluting vehicles, people will continue to breathe dirtier air, consumers will lose faith in watchdog agencies, and manufacturers will believe they can endanger our health without feeling the full consequence,” the Sierra Club environmental group said.
Breyer said VW will commit additional funds to “promote other green automotive technologies.”
New York Attorney General Eric Schneiderman said the deal “does not in any way resolve the consumer and environmental penalty claims of the states, or the states’ claims for injunctive relief.”
Volkswagen spokeswoman Jeannine Ginivan said customers do not need to take any action immediately. Based on the court schedule outlined on Thursday, the earliest buybacks would begin is likely in July.
On Thursday, Germany’s justice minister and Europe’s industry boss raised the pressure on Volkswagen to compensate European consumers as well. In Europe, VW officials have said they will repair vehicles to remove illegal software, but have no plans to pay consumers compensation, arguing they have suffered no loss.
There are an estimated 8.5 million European owners of VW cars fitted with illegal software, out of 11 million worldwide.
Reuters first reported many of the details on Wednesday of the US settlement.
Reuters reported that owners will get around two years to decide whether to sell their vehicles back including the 2009-2015 diesel Jetta and will be offered the estimated value of the vehicles from September 2015, before the scandal erupted, along with an unspecified premium.
VW’s use of the software allowed 11 million vehicles to emit up to 40 times legally allowable emissions levels. The scandal prompted the resignation of then-CEO Martin Winterkorn, and VW’s top US executive abruptly stepped down in March.