Owners of Volkswagen AG diesel vehicles in the US can choose to either sell their car back to the company or get a repair that could diminish the vehicle’s performance under a settlement of claims tied to the German automaker’s emissions-cheating scandal.
The settlement is to cost Volkswagen US$14.7 billion, a person briefed on the settlement talks said on Monday, but does not resolve all the legal issues stemming from its admission that nearly half a million vehicles with 2-liter diesel engines were programmed to turn on emissions controls during government lab tests and turn them off while on the road.
The figure represents the largest auto scandal settlement in US history.
The deal sets aside US$10 billion to repair or buy back about 475,000 polluting Volkswagen vehicles.
Whether they choose to have Volkswagen buy back their vehicle or repair it, owners are to receive a payment of between US$5,100 and US$10,000, the person said. The person asked not to be identified, because the deal was not to be filed in court until yesterday and a judge has ordered attorneys not to talk about it before then.
Owners who choose to have Volkswagen buy back their cars would get the clean trade-in value from before the scandal became public on Sept. 18 last year.
The average value of a Volkswagen diesel vehicle has dropped 19 percent since just before the scandal began. In August last year, the average was US$13,196, dropping to US$10,674 last month, according to Kelley Blue Book Co.
Volkswagen would also offer to fix the cars for free, but any repair that improves the pollution controls is likely to hurt the cars’ acceleration and fuel economy.
Volkswagen marketed the cars as both more fuel-efficient and better performing than vehicles with gasoline engines.
The settlement still requires a judge’s approval before it can go into effect.
Owners can choose to decline Volkswagen’s offer and sue the company on their own.
The settlement also includes US$2.7 billion for environmental mitigation and another US$2 billion for research on zero-emissions technology, the person said.
Don Marron, a banker from Allentown, Pennsylvania, who owns a 2012 Jetta SportWagen diesel, said he was glad Volkswagen is offering more compensation than earlier reports had suggested.
However, Marron wants assurance that if Volkswagen fixes his car, but he does not like the way it performs, the company will still buy it back. And if he keeps his car and saves Volkswagen money, he wants compensation for doing that.
Volkswagen is still facing billions more in fines and penalties, a lawsuit by state attorneys general and potential criminal charges.
The US$14.7 billion settlement does not include another roughly 90,000 Volkswagen 3-liter diesel engine vehicles, which had another version of cheating software.
Volkswagen in April took an US$18.2 billion charge to cover the cost of the global scandal, which includes a total of 11 million vehicles worldwide.
The company has admitted to developing sophisticated software that determined when the cars were being tested by the US Environmental Protection Agency on a dynamometer and turned on the pollution controls. Once all wheels began spinning and the steering wheel was turned, the controls were turned off.
The company, which knew the agency’s testing routine, got away with the scam for seven years before being caught by the International Council on Clean Transportation, which hired West Virginia University to test a Volkswagen diesel vehicle in real roads conditions.
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