Tuesday 27 September 2016

Volkswagen to pay €890m to US diesel owners after emissions scandal

Published 21/04/2016 | 07:24

Some owners would get a choice of having VW repair their cars or buy them back.
Some owners would get a choice of having VW repair their cars or buy them back.

Volkswagen, the US government and private lawyers have reached a deal for the car maker to buy back some of the nearly 600,000 diesel cars that cheat on emissions tests and stump up more than one billion dollars (€890 million) to compensate owners.

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The "deal in principle" includes a maximum amount of spending, but the final details, such as how much each owner would get, are still being worked out, according to a source briefed on the matter.

Some owners would get a choice of having VW repair their cars or buy them back, but that would vary by model year and engine type, the person said.

The deal is likely to be part of a bigger payment package from VW and it does not yet include plans on how to repair the cars, which can spew out harmful nitrogen oxide at 40 times the allowable limit, the source said.

The agreement is likely to be announced during a federal court hearing in San Francisco today.

"They've agreed on a maximum amount of money, over one billion dollars" for compensation, said the person. "How it's allocated and distributed, that remains to be seen."

It means US owners will probably not yet find out how their cars will be fixed, nor will they know exactly how much they will receive in compensation. With one billion to spend, it works out to about 1,700 dollars (€1,505) per car. But some owners of newer models who have just a software fix may receive little.

About 325,000 owners of older cars that require more extensive repairs will peobeblt receive more because the repairs could affect mileage and performance.

At the court hearing, Senior US District Court judge Charles Breyer will also discuss a schedule for depositions and information exchange between all sides in the case. He could even set a trial date if he is dissatisfied with the agreement.

Representatives for Volkswagen, the lawyers, and the government declined to comment on Wednesday. Wyn Hornbuckle, a spokesman for the US Justice Department, which has sued Volkswagen, said officials would wait until the hearing before speaking.

John Gersten, a spokesman for a legal firm representing hundreds of Volkswagen owners, said a confidentiality order barred it from making any comment.

The owners filed dozens of lawsuits against VW after it acknowledged in September that it intentionally defeated emissions tests and put dirty vehicles on the road. The cheating allowed cars to pass laboratory emissions tests while polluting on real roads.

Volkswagen told its shareholders last year it had set aside 7.3 billion dollars (£5bn) to help defray the potential costs of a recall or regulatory penalties but most outside observers have said that figure is probably far too low.

The company faces as much as 20 billion dollars (£14bn) in fines for Clean Air Act breaches alone, before paying to fix the cars or compensate their owners.

Judge Breyer has told the lawyers to come up with repair and compensation plans before Thursday's hearing or face a trial. He wants to know the timing of any fixes and any planned payments to owners, among other details. It was unclear if the plans would satisfy his request.

Lawyers for the owners have said in court papers that if there is no deal, they want an urgent hearing or a trial before the judge to get an order for "equitable relief" that would begin in July, or a full trial that would include punitive damages against VW in the same time frame.

Volkswagen says in documents that it does not believe a hearing or trial is appropriate, apparently because progress is being made on a fix and compensation. A solution could be revealed at Thursday's hearing.

The first item on Thursday's agenda is a report on the status of fixing the cars and "related discussions". It also includes a request to add the Federal Trade Commission to the case.

The FTC has sued VW alleging deceptive advertising. The owners' lawyers are also seeking documents that Volkswagen provided to the law firm Jones Day, which the company has hired to investigate how the cheating happened.

California Air Resources Board enforcement chief Todd Sax said last month he did not think it was technically feasible to repair any of VW's two-litre diesel engines, under the bonnets of most of the models at issue, to meet that state's stringent clean air rules.

Judge Breyer said in March that former FBI director Robert Mueller told him Volkswagen, government regulators and lawyers for car owners had made substantial progress towards a resolution that would get the polluting cars off the road. The judge had appointed Mr Mueller to oversee settlement talks.

Meanwhile Japanese car maker Mitsubishi, tarnished by a massive recall cover-up 15 years ago, owned up to another scandal on Wednesday, saying employees had intentionally falsified fuel mileage data for several vehicle models.

The inaccurate tests by the Tokyo-based company involved 157,000 of its own-brand eK wagon and eK Space passenger cars and 468,000 Dayz and Dayz Roox vehicles produced for Nissan.

The models are all so-called "mini-cars" with tiny engines whose main attraction is generally great mileage. They were produced from March 2013.

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