Volkswagen (VW) AG on Tuesday confirmed it has negotiated a US$4.3 billion draft settlement with US regulators to resolve its diesel emissions troubles and plans to plead guilty to criminal misconduct.
The guilty plea is part of the civil and criminal deal as the automaker looks to restore its tarnished global brand.
VW said with the addition of the fine, its diesel costs will exceed the nearly 18.2 billion euros (US$19.2 billion) it has set aside to handle the problem.
VW also said it would face oversight by an independent monitor over the next three years.
Reuters reported earlier that the company’s supervisory board was set to meet yesterday to approve a civil and criminal settlement with the US Department of Justice over the automaker’s diesel emissions.
VW said the supervisory board and the management board would meet on Tuesday or Wednesday next week to approve the deal.
VW is expected to plead guilty as part of the settlement as early as Wednesday next week, a source familiar with matter said.
The plea deal will need the approval of a US judge.
Evercore ISI said in a research note it believes the “settlement is intended to draw a line under all remaining US related legal risk. This is good news.”
VW had raced to get a deal done before US President Barack Obama leaves office on Friday next week. A change in administration could have delayed a final settlement for months if not longer.
“The most important news is that VW managed to come to an agreement that allows the company to move on from here. It’s a major relief that this doesn’t get dragged into the new US administration,” Evercore ISI said.
VW admitted in September 2015 to installing secret software in hundreds of thousands of US diesel cars to cheat exhaust emissions tests and make them appear cleaner than they were on the road, and that as many as 11 million vehicles could have similar software installed worldwide.
On Monday, VW executive Oliver Schmidt, the second VW employee charged by US prosecutors, was accused of conspiracy to defraud the US over the company’s emissions cheating and the automaker was accused of concealing the cheating from regulators.
The Justice Department settlement with VW will not end the department’s investigation into individual misconduct and more executives may face charges, sources said.
VW still must spend the next two years buying back or fixing dirty US vehicles and faces unresolved lawsuits from US investors in about 20 US states.
VW’s expected guilty plea is in contrast to department deferred prosecution agreements with Toyota Motor Corp and General Motors Co, which were both accused of misleading regulators or consumers and paid fines of US$1.2 billion and US$900 million respectively, but were not required to plead guilty.
VW warned in a financial disclosure the impact of the US settlement on last year’s group results cannot be quantified yet, citing “various further factors.”
VW said in October last year it expected the group operating margin to come in at the upper end of a 5 to 6 percent target range before one-off items, compared with 6 percent in 2015.
The carmaker is due to announce last year’s results on March 14.
Volkswagen had previously agreed to spend up to US$17.5 billion in the US to resolve claims by US regulators, owners and dealers, and offered to buy back nearly 500,000 polluting vehicles.