German automakers to pay 500,000 US diesel owners $5,000 each on average and a series of emissions settlements

This article is more than 4 years old

This article is more than 4 years old

Volkswagen’s settlement with nearly 500,000 US diesel owners and government regulators over polluting vehicles is valued at more than $15bn (£11.3bn) cash, a source briefed on the matter said on Monday.



The settlement, to be announced on Tuesday in Washington, includes $10.03bn to offer buybacks to owners of about 475,000 polluting vehicles and nearly $5bn in funds to offset excess diesel emissions and boost zero emission vehicles, the source said.

A separate settlement with nearly all US state attorneys general over excess diesel emissions will be announced on Tuesday and is expected to be more than $500m pushing the total to over $15bn, a separate source briefed on the matter said.

The US Environmental Protection Agency and Volkswagen declined to comment.

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Speaking on condition of anonymity, due to court-imposed gag rules, the original source said that owners of 2.0 litre diesel VW 2009-2015 cars will receive an average of $5,000 in compensation along with the estimated value of the vehicles as of September 2015, before the scandal erupted.

Prior owners will get half of current owners, while people who leased cars will also get compensation, said the original source.

Owners would also receive the same compensation if they choose to have the vehicles repaired, assuming US regulators approve a fix at a later date.

The settlement includes $2.7bn in funds to offset excess diesel emissions and $2bn for green energy and zero emission vehicle efforts, the source said. The diesel offset fund could rise if VW has not fixed or bought back 85% of the vehicles by mid-2019, the first source said.

The settlement, the largest ever automotive buyback offer in US history and most expensive auto-industry scandal, stems from the German automaker’s admission in September 2015 that it intentionally misled regulators by installing secret software that allowed US vehicles to emit up to 40 times legally allowable pollution.

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VW still must reach agreement with regulators on whether it will offer to buyback 85,000 larger 3.0 litre Porsche, Audi and VW cars and SUVs that emitted up to nine times legally allowable pollution and how much it may face in civil fines for admitting to violating the Clean Air Act.

Reuters reported earlier the initial VW settlement would not include civil penalties under the US Clean Air Act or address about 80,000 larger 3.0 litre Audi, Porsche and VW vehicles that emitted less pollution than 2.0 litre vehicles. A deal covering the 3.0 litre vehicles may still be months away.

The settlement does not address lawsuits from investors or a criminal investigation by the Justice Department.

Regulators will not immediately approve fixes for the 2.0 litre vehicles – and may not approve fixes for all three generations of the polluting 2009-2015 vehicles, sources previously told Reuters.

The actual amount VW will spend will depend on how many vehicles are repurchased.

Owners will have two years to decide whether to sell back vehicles – and it is not clear when EPA and California will decide whether to approve fixes, which may not eliminate all excess emissions.

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US district judge Charles Breyer in San Francisco will hold a hearing on 26 July to decide on whether to grant preliminary approval to the settlements. If granted, he would hold a later hearing to give final approval. Buybacks are likely to start no earlier than October, the first source said.

In April, VW set aside $18.2bn to account for the emissions scandal.

VW had said the scandal impacted 11m vehicles worldwide and led to the departure of CEO Martin Winterkorn.

Last week, Germany’s financial watchdog called on prosecutors to investigate VW’s entire former management board over the time it took to disclose the carmaker’s emissions test cheating, a person familiar with the matter told Reuters.

German prosecutors said this month they are investigating Winterkorn and a second unidentified executive over whether they effectively manipulated markets by delaying the release of information about the firm’s emissions test cheating.