Volkswagen Set for Near $15 Billion Emissions Settlement

By William Boston, The Wall Street Journal

28 June 16

olkswagen AG , attorneys for the U.S. government and angry customers are set to announce a package of measures valued at up to $15 billion to resolve the German car maker’s emissions-cheating scandal in the U.S., though European owners of nearly three million tainted vehicles may go empty-handed.

Lawyers representing the plaintiffs are scheduled to file documents with the Federal District Court of Northern California in San Francisco on Tuesday. The documents will include details of an agreement thrashed out since February in marathon sessions among attorneys for the three sides.

Volkswagen has agreed to provide compensation for U.S. car owners worth about $10 billion, including an offer to buy back nearly 500,000 affected vehicles and provide car owners additional compensation of between $5,100 and $10,000, according to people familiar with the deal.

Volkswagen has also agreed to pay more than $4 billion into a fund to compensate for environmental damage and promote environmentally friendly vehicles. The Wall Street Journal reported terms of the agreement last week.

Volkswagen declined to comment on the details of the agreement with plaintiffs.

Federal Judge Charles Breyer will hold a so-called status conference to discuss the filing with all parties on June 30, but a decision won't be made until July at the earliest.

U.S. environmental authorities disclosed in September that Volkswagen had manipulated diesel engines to recognize when they were undergoing emissions tests in the laboratory, causing the engines to emit legally allowed levels of toxic nitrogen oxides during tests but exceed those limits in real traffic.

Volkswagen has since admitted to rigging nearly 11 million vehicles world-wide to cheat on emissions tests and faces civil and criminal investigations in the U.S., Europe and Asia.

Even as Volkswagen nears its crucial first step in resolving the emissions-cheating scandal in the U.S., its troubles in Europe -- where 2.7 million vehicles are affected -- may just be starting.

Several lawsuits have been filed in Germany on behalf of investors, including large pension funds such as Calpers, the Norwegian state oil fund, and Nordea, a Swedish investment fund. German courts have yet to rule on allowing class-action suits to go forward, a stricter process than in the U.S.

News of the impending agreement to compensate U.S. customers has raised concern in Brussels that the much larger number of European customers who bought tainted diesel-powered vehicles from Volkswagen wouldn't receive equal compensation from the German car maker.

“Volkswagen should voluntarily offer compensation for European car owners that is comparable to what is being paid to U.S. consumers,” said Elzbieta Bienkowska, European Industry and Internal Market Commissioner.

Volkswagen has repeatedly said that it sees no reason to compensate European customers because of differences in U.S. and European law and environmental standards. Under EU rules, the company has said, Volkswagen’s diesel vehicles don't violate emissions standards.

It has also said that the vehicles containing the illegal software can be more easily repaired in Europe. Volkswagen is recalling nearly three million vehicles in Europe to remove the defeat devices and make the cars compliant with the law.

Nevertheless, European officials, consumer groups and plaintiffs’ attorneys in say Volkswagen should compensate European victims to regain customers’ trust.

“Consumers have been massively misled by Volkswagen and this settlement in the U.S. recognizes the damage suffered by car drivers,“ said Monique Goyens, general director of the European Consumer Organization, a Brussels-based consumer lobby. ”It is inconceivable that consumers in the EU get treated differently."