San Francisco - Volkswagen took an important step in
digging out from its emissions-cheating scandal by reaching a $1 billion
agreement to settle lawsuits over tainted 3.0-liter diesel engines.
The preliminary accord calls for the German automaker to
fix or buy back 83 000 Audi, VW and Porsche vehicles equipped with a so-called
defeat device. The deal includes pledges by Volkswagen to spend $225 million to
mitigate environmental damage the autos caused and $25 million to support the
use of zero-emission models, the California Air Resources Board and the US
Department of Justice said in statements following a US federal court hearing
in San Francisco.
Resolving the issue with the 3-liter vehicles has proven
to be sticky as Volkswagen insisted the engines were fixable and balked at
agreeing to buy back all of the affected cars, in contrast to an October deal
covering 480 000 rigged 2-liter autos in the US While the settlement is a step
forward, it will potentially add to the 18.2 billion euros ($18.9 billion)
Volkswagen has so far set aside to cover the damages from years of duping
consumers and regulators by manipulating emissions tests in a scandal involving
11 million diesel vehicles worldwide.
Volkswagen is still under criminal investigation in the US
and on the hook for outstanding civil claims from several states. It also faces
hundreds of investor lawsuits in Germany and is the subject of a criminal probe
there as well as in South Korea.
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The Justice Department said the settlement reached
Tuesday “does not resolve any pending claims for civil penalties, nor does it
address any potential criminal liability,” nor does the deal “resolve any
consumer claims, claims by the Federal Trade Commission or claims by individual
owners or lessees who may have asserted claims in the ongoing multidistrict
litigation.”
Remaining issues
The US Environmental Protection Agency estimated that the
accord reached Tuesday will cost Volkswagen $1 billion, which would increase
the amount it has agreed to pay to resolve claims in the US and Canada to more
than $19 billion. Jeannine Ginivan, a spokeswoman for VW’s US unit, declined to
comment on any dollar figure until a final agreement has been reached with car
owners.
Details of the agreement with car owners were still being
worked out, and US District Judge Charles Breyer, who’s overseeing the case in
San Francisco, ordered lawyers to report back to him Thursday.
The settlement marks “an important step in the right
direction to get the DOJ criminal fine out of the way, which we expect under
the Obama administration,” Arndt Ellinghorst, a London-based analyst at
Evercore ISI, said in a note to clients. He estimates the financial hit from
that penalty to be $3 billion.
Read also: Why the VW settlement isn't fair
Volkswagen is “committed to earning back the trust of all
our stakeholders and thank our customers and dealers for their patience as the
process moves forward,” the carmaker said in a statement.
VW shares rose 0.4 percent to 136.85 euros as of 10:15
a.m. Wednesday in Frankfurt. The stock has fallen 16 percent since the
revelation of the scandal in September 2015.
Bosch claims
The settlement provides for repairing the cars if a fix
is approved by the government. It also covers claims against VW supplier Robert
Bosch GmbH, which said specific terms may not be disclosed until a definitive
agreement is reached and presented to the judge. “Bosch neither acknowledges
the facts as alleged by the plaintiffs nor does Bosch accept any liability,”
the component maker said in a statement.
Vehicles covered by the 3-liter settlement include the
2014 Volkswagen Touareg, some 2015 Porsche vehicles and some 2016 Audi models.
Recall plans for most 3-liter vehicles involve a simple software
update, people familiar with the matter have said. Avoiding a full buyback
of all the cars would save the company about $4 billion, the people said.
-With assistance
from Alan Katz, Joel Rosenblatt, Jennifer A. Dlouhy, Margaret Cronin Fisk, Tom
Schoenberg and Christoph Rauwald.
BLOOMBERG