Volkswagen will settle for over 15 billion US dollars: Sources
The settlement will be announced on Tuesday. Photograph: (Reuters)
Volkswagen's (VW) settlement with nearly 500,000 US diesel car owners and government regulators over polluting vehicles is valued at more than $15 billion, two sources briefed on the matter said on Monday.
The settlement, to be announced on Tuesday (June 28) in Washington, includes $10.033 billion to offer buybacks to owners of about 475,000 polluting vehicles and nearly $5 billion in funds to offset excess diesel emissions and boost zero emission vehicles, the sources said.
A separate settlement with nearly all US state attorneys general over excess diesel emissions will be announced on Tuesday and is expected to be more than $500 million. This would push the total to over $15 billion, a separate source briefed on the matter said.
Spokeswomen for the US environmental protection agency and Volkswagen declined to comment.
"The settlement for Volkswagen is really the first step that they've made publicly after the admission of fault they made publicly in September of last year," said Patrick Min, Senior Industry Insights Analyst with TrueCar. "So the amount of $15 billion, far and away the largest amount in US history is really the first step in terms of setting aside money in order to repair vehicles or actually buy them back from owners."
Speaking on condition of anonymity the first sources said that owners of 2.0 litre diesel VW 2009-2015 cars will receive at least $5,100 compensation along with the estimated value of the vehicles as of September 2015, before the scandal erupted. Some owners will get as much as $10,000 in compensation, the first sources said, depending on the value of the car.
The $10.033 billion is the maximum VW could pay if it had to buyback all vehicles, but the actual amount VW will pay could be significantly less if a large number of owners take buybacks.
Prior owners will get half of current owners, while people who leased cars will also get compensation, said the first sources.
Owners would also receive the same compensation if they choose to have the vehicles repaired, assuming U.S. regulators approve a fix at a later date.
"This is just the tip of the iceberg in terms of what they can expect from other follow-on lawsuits, from certain states such as California that are going to go for even more action," said Min, on what further legal action VW may be facing. "The impacts are going to continue further with respect to future product development and what Volkswagen can achieve with a diminished budget going forward."
The settlement includes $2.7 billion in funds to offset excess diesel emissions and $2 billion in VW investments in green energy and zero emission vehicle efforts, the first sources said. The diesel offset fund could rise if VW has not fixed or bought back 85 percent of the vehicles by mid-2019, the first sources said.
The $2 billion in green energy and zero emission efforts will be spent over 10 years, the first sources said, and will include zero emission vehicle infrastructure.
The settlement, the largest ever automotive buyback offer in U.S. history and most expensive auto industry scandal, stems from the German automaker's admission in September 2015 that it intentionally misled regulators by installing secret software that allowed U.S. vehicles to emit up to 40 times legally allowable pollution.
VW still must reach agreement with regulators on whether it will offer to buyback 85,000 larger 3.0 liter Porsche, Audi and SUVs that emitted up to nine times legally allowable pollution and how much it may face in civil fines for admitting to violating the Clean Air Act.
Reuters reported earlier the initial VW settlement would not include civil penalties under the U.S. Clean Air Act or address about 85,000 larger 3.0 litre Audi, Porsche and VW vehicles that emitted less pollution than 2.0 litre vehicles. A deal covering the 3.0 litre vehicles may still be months away.
The settlement does not address lawsuits from investors or a criminal investigation by the Justice Department.
Owners will have until December 2018 to decide whether to sell back vehicles or opt for fixes that may not eliminate all excess emissions.
VW cannot resell or export the vehicles bought back unless EPA approves a fix, Reuters reported last week.
VW, the world's second largest automaker, has seen U.S. VW brand sales suffer in the wake of the crisis. VW brand sales are down 13 per cent in the United States in 2016, while sales of its luxury Audi and Porsche units have risen.