Volkswagen (VLKAY) to Pay $14.7 Billion in Emissions Scandal Settlement

On Tuesday, one of Europe’s biggest car manufacturers Volkswagen AG VLKAY has agreed to pay up to $14.7 billion to settle diesel emissions claims in the United Sates.

The settlement will be broken down as follows: just over $10 billion will go towards buying back affected vehicles at their value before the scandal broke, and giving cash compensation to the owners; $2.7 billion will be funneled into a government fund to help make up for the environmental impact from the cars; and $2 billion will be spent on cleaner-vehicle projects.

Under the terms of the agreement, Volkswagen will not be allowed to ship the affected vehicles to other countries to avoid getting rid of them. For the owners who choose to keep their cars, the automaker has yet to disclose how it will fix them or how much vehicle performance will be modified.

Owner compensation, which would be in addition to the buyback price, will be contingent on a number of factors like type, vehicle age, and number of miles, among others. 

And, the total monetary settlement amount could be even higher, as Volkswagen deals with other cases stemming from the scandal. “Due to the complexities and legal uncertainties associated with resolving the diesel matter, a future assessment of the risks may be different,” the company said in a statement.

Volkswagen also reached a $603 million separate agreement with 44 U.S. states, the District of Columbia, and Puerto Rico to help resolve claims regarding consumer protection for the diesel cars.

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At a news conference in Washington on Tuesday, Attorney General Sally Q. Yates called the scandal “one of the most flagrant violations of environmental and consumer laws” ever in the United States.

The settlement was the largest ever for an automaker, with Volkswagen reaching agreements with the U.S. Justice Department, the Environmental Protection Agency (EPA), the Federal Trade Commission, California regulators, and lawyers of consumer plaintiffs.

“We know that we still have a great deal of work to do to earn back the trust of the American people,” Volkswagen Chief Executive Matthias Müller said. “We are focused on resolving the outstanding issues and building a better company that can shape the future of integrated, sustainable mobility for our customers.”

Almost 500,000 diesel-powered vehicles were involved in the emissions-cheating scandal, which ignited a wave of litigation against and multiple investigations into the auto company. Vehicles with model years between 2009 and 2015, including Jettas, Passats, Beetles, Golfs, and Audi A3s, were all affected. Worldwide, Volkswagen admitted to installing the emissions-cheating device in more than 11 million cars, with 8.5 million in Europe.

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