VW emissions rigging costs $15B in U.S. aloneVolkswagen’s price tag to settle lawsuits in the U.S. over its rigging of diesel emissions tests has jumped to more than $15 billion - $5 billion more than previously reported - on the eve of a settlement to be filed Tuesday in a San Francisco court.
Under the deal, VW will set aside up to $10.03 billion to cover costs including buying back vehicles at pre-scandal values and compensating drivers as much as $10,000 per car for their troubles, two people familiar with the negotiations said. Those figures could rise if VW misses certain deadlines.
In addition, Volkswagen will pay $2.7 billion in fines that will go to the U.S. Environmental Protection Agency (EPA) and California Air Resources Board (CARB), and invest $2 billion in clean-emissions technology, one of the people said. The carmaker is also expected to announce a settlement with states, including New York, for about $400 million, another person said.
That total far exceeds any previous U.S. civil settlement with an automaker, and it brings VW closer to the 16.2 billion euros ($17.85 billion) it has set aside to cover the costs of the scandal. But it won’t put an end to VW’s legal troubles spanning three continents as the company still faces civil and criminal actions in other jurisdictions.
The total economic impact of the scandal on VW was estimated at $55 billion euros by Richard Hilgert, an analyst at Morningstar Equity Research. That includes government fines, dealer remuneration, repair costs, vehicle repurchases, plus the litigation costs and damages awarded plaintiffs from class action lawsuits filed by shareholders and consumers, he said in a June 17 report.
The compensation figure jumped over the past few days, these people said, as the parties changed their estimates on what it would take to get some 85 percent of owners to trade in their vehicles under the settlement.
Another person familiar with the matter didn’t dispute the final amount, but said it had remained constant since a preliminary agreement was reached in April.
VW, whose brands include Audi and Porsche, has admitted to systematically rigging environmental tests since 2009 to hide that its diesel vehicles were emitting far more pollutants than allowed under U.S. and California law.
The agreements between VW and the U.S. Department of Justice, EPA and CARB will be filed with U.S. District Judge Charles Breyer by noon San Francisco time on Tuesday. Breyer is overseeing more than 800 lawsuits over the rigged vehicles. The $2.7 billion to be paid to regulators will be placed in a trust to fund pollution-reduction projects.
The Volkswagen settlement would be one of the largest in corporate history, exceeded by the $246 billion agreement between the tobacco industry and U.S. states in 1998 and the multiple payments to private parties and governments over the 2010 BP oil spill. BP’s final bill isn’t yet known, but it includes agreements to pay more than $25 billion to the U.S. and states and at least $12.9 billion for claims of private property and economic loss.
The rising cost of the U.S. settlement raises the question of whether VW has set aside enough money to put the scandal behind it. Maryann Keller, an independent auto industry consultant in Stamford, Connecticut, said the answer depends on how non-U.S. consumers and governments react.
“The bigger problem is if people in other countries and other governments want a similar deal,” Keller said. “If they do, I don’t think $18 billion will cut it.”
The U.S. settlement is expected to make up the lion’s share of VW’s overall cost for the scandal, but other legal action is still pending. For example, the company still faces criminal investigations in the U.S., Germany and Korea. Bloomberg
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