$14.7B deal OK'd in VW's cheating

Judge calls U.S. case settlement ‘fair’

A $14.7 billion deal in the Volkswagen emissions-cheating case, the largest auto-scandal settlement in U.S. history, was approved Tuesday by a federal judge in San Francisco.

The deal gives about 475,000 owners of Volkswagens and Audis with 2-liter diesel engines the opportunity to have their cars bought back or modified by Volkswagen and to seek additional cash compensation.

U.S. District Judge Charles Breyer, who has overseen the litigation against the German automaker, approved the settlement that was proposed in July. He called the deal "fair, reasonable and adequate."

The scandal began a year ago when Volkswagen admitted that it had installed "cheat devices" or software on diesel-powered cars from 2009 through 2015. The devices enabled the vehicles' engines to emit less pollution during emissions tests than they would during normal road use.

Nearly 600,000 cars in the United States and 11 million Volkswagen vehicles worldwide were built to fool emissions tests.

Volkswagen said Tuesday that it would start to implement the U.S. settlement immediately and that it was hiring 900 people to help with the buybacks, including one employee to be stationed at each of its 652 U.S. dealerships.

The automaker also has a website, vwcourtsettlement.com.

The settlement "is an important milestone in our journey to make things right in the United States," Hinrich Woebcken, chief executive of Volkswagen Group of America Inc., said in a statement.

Under the settlement, owners of certain 2-liter diesel cars made by Volkswagen in the model years 2009 through 2015 will receive between $12,500 and $44,000 from the automaker to buy back their cars. Leases for those vehicles may be terminated without penalty, and leaseholders also may seek cash payments.

Instead of having their cars bought back, drivers can choose to have VW modify the vehicles to meet emissions standards -- once that method is approved by the California Air Resources Board and the Environmental Protection Agency. Federal officials said such a modification does not yet exist, though the company is working on a fix.

Regardless of whether they choose the buyback or modification option, owners will receive a cash payment of at least $5,100 and as much as $10,000, depending on the model.

The 475,000 cars affected by the agreement include Volkswagen's popular Beetles, Golfs, Jettas and Passats. Some Audi A3s also are covered.

The agreement does not cover about 90,000 cars with 3-liter engines that also had the cheating software. Volkswagen, regulators and consumers' lawyers still are negotiating a possible settlement for those vehicles.

Volkswagen overall is to spend up to $10 billion to buy back or modify the VW and Audi 2-liter diesel vehicles in the United States. The final figure depends on how many car owners take advantage of the offer.

Volkswagen also will pay $2.7 billion into a trust to support environmental programs and reduce emissions, as well as pay $2 billion over a 10-year period to invest in and promote zero-emissions vehicles.

The automaker reached three separate but related settlements: the first with the U.S. Department of Justice, the California attorney general's office, the California Air Resources Board and the EPA; the second with the Federal Trade Commission; and the third with owners. The agreements were developed in parallel.

The settlement "sets in motion a public process that will develop a range of projects to mitigate the harmful health effects of smog," Mary Nichols, chairman of the California Air Resources Board, said in a statement.

Elizabeth Cabraser, the court-appointed lead counsel for the Volkswagen consumer plaintiffs, said "we are very pleased that the court has granted final approval to this historic settlement that holds Volkswagen accountable for its illegal behavior and breach of consumer trust."

She said in June that before customers choose to have their vehicles fixed instead of opting for the buyback, they will be notified with full disclosure of any potential effects on fuel efficiency and vehicle performance.

Volkswagen's payout for settlements is among the largest in corporate history, exceeded by the $246 billion agreement between the tobacco industry and U.S. states in 1998 and the $38 billion BP PLC has spent so far over the 2010 oil spill in the Gulf of Mexico to resolve government investigations as well as claims for private-property and economic losses.

"VW got itself in a lot of trouble on both sides of the Atlantic, basically lying to a host of governmental regulators, its ultimate customers and its many dealers in between," said Anthony Sabino, a law professor at St. John's University in New York and an expert on complex litigation. "They're not getting off cheap, but they're stopping the bleeding."

Late last month, Volkswagen agreed to pay its U.S. dealers up to $1.2 billion to compensate them for losses suffered as a result of emissions cheating.

The dealers are expected to receive about $1.85 million each, but they can choose to opt out of the deal and pursue their own lawsuits against Volkswagen. A judge still has to approve that settlement.

Information for this article was contributed by Kartikay Mehrotra and Margaret Cronin Fisk of Bloomberg News.

A Section on 10/26/2016

Upcoming Events