VW Dieselgate Nearing U.S. Conclusion As Parties Agree To $3B Settlement

Far more quickly than anyone has been expecting, it looks as if Volkswagen may be on the verge of settling its emissions rigging challenge and forging ahead. According to sources, the automaker and the U.S. Department of Justice (USDOJ) are near agreement on a resolution to civil and criminal probes. The investigations were launched in the wake of the Dieselgate scandal.

Settlement Spelled Out

Sources told Reuters Friday that the agreement would require:

• VW to pay a penalty of over $3 billion
• VW’s oversight by an outside monitor
• VW to undergo “significant reforms” arising from the automaker’s self-inflicted scandal

Though all parties acknowledge the pact could still change or that it might even fall apart, a deal could be announced by as early as next week, a week ahead of the installation of a new administration in Washington. A spokesman for the automaker, speaking from the automaker’s headquarters in Wolfsburg, Germany, declined to comment, saying the talks were continuing.

Volkswagen has already agreed to pay up to $17.7 billion to settle claims by consumers, federal and state regulators and dealers. Owners of 2.0-liter four- and 3.0-liter six-cylinder turbodiesels will receive up to $11.03 billion in compensation. The bulk of the compensation will go to four-cylinder turbodiesel owners who are to receive buybacks and compensation, while the majority of the 3.0-liter owners, 60,000, will have their vehicles fixed and receive compensation while the remaining 20,000 will be given a buyback and payment. Volkswagen Settlement Still Under Wraps

Also, VW has agreed to pay another $1 billion to regulators to settle the 3.0-liter portion of the scandal. The automaker will also pay $2.5 billion into a mitigation fund to pay for damage caused by diesel emissions and $2 billion to fund electric vehicle and infrastructure improvements. Also, VW will pay dealers $1.2 billion in compensation. VW Pays $200 Million More To Settle Scandal

The $3 billion agreement raises the tab for Dieselgate to a bit less than $21 billion.

Dieselgate Burst Onto Scene

sDieselgate, as the entire diesel-cheating scandal has come to be known, burst onto the scene in September 2015 At that time, VW admitted installing a “defeat device,” that enabled its vehicles to pass emissions tests, though they had failed.

The first vehicles affected were 2.0-liter four-cylinder turbodiesels whose engines were developed in 2006. The powerplant was supposed to use urea formaldehyde doping, a process licensed from Mercedes-Benz. VW deep-sixed the licensing plan when project leadership changed hands. The engineering staff opted for emissions reburn, a technology that was known not to work and the scandal began. Engineers turned to emissions software cheating to make it appear their powerplants worked better than they did.

The reality was that instead of working correctly, the 2.0-liter engines emitted up to 40 times the allowable emissions of nitrous oxide, a particularly nasty greenhouse gas producer.

VW did fool everyone – consumers, regulators and dealers – from 2009 to 2015 when the scandal burst open. It soon developed that not only did 2.0-liter turbo fours have problems but that 3.0-liter V-6 engines were also troubled, emitting about nine times the allowable limits. The 3.0-liter engines also used the “defeat device.”

Summing Up The Costs

Summing up the costs, Volkswagen has so far agreed to pay just under $21 billion to settle all parts of the case, a hefty monetary penalty that will likely grow as Dieselgate is settled across the globe – 11 million vehicles were affected. The human cost has also been high with the chief executives of Volkswagen units losing their jobs. And, Audi fired its research and development director. The automaker also terminated the former chairman of its supervisory board. And, South Korea has just sentenced an engineer, while a second engineer is working with U.S. authorities, so the courts delayed his sentence. The automaker suspended another 60 mid-level executives and engineers.

Sources: Reuters, Automotive News