More than nine months after the Volkswagen diesel cheating scandal came to light, the full details of the proposed final settlement between VW and the EPA were released this morning by Judge Charles Breyer.
Owners of the TDI diesel vehicles from Audi and Volkswagen fitted with "defeat device" software between 2009 and 2015 must now decide what to do.
But they also have to wait four more weeks, while comments on the proposed deal are received by both parties—and a lot of commenting is anticipated.
The current date for the finalized terms to be released is July 26, after which VW will contact owners about buybacks, separate cash payments, and more.
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The proposed settlement, weighing in at 225 pages, was agreed among Volkswagen AG, the U.S. Department of Justice, the State of California, the U.S. Federal Trade Commission, and the owners of the cars represented by the Plaintiffs Steering Committee in consolidated class-action lawsuits.
Today's announcement includes a fund of $10.03 billion from Volkswagen to buy back or modify the affected vehicles. The goal is remove the majority of them from the road within three years.
Of 499,000 such vehicles built, approximately 466,000 remain on the road today, according to VW. The $10.03 billion number assumes 100 percent of the cars are bought back
If VW is not successful in removing 85 percent of the affected 2.0-liter cars from U.S. roads by June 30, 2019, it will have to pay additional funds into an environmental mitigation trust.
![Consumer Reports tests 2015 Volkswagen Jetta TDI diesel in 'cheat mode,' October 2015 [video frame]](https://images.hgmsites.net/lrg/consumer-reports-tests-2015-volkswagen-jetta-tdi-diesel-in-cheat-mode-october-2015-video-frame_100530187_l.jpg "Consumer Reports tests 2015 Volkswagen Jetta TDI diesel in 'cheat mode,' October 2015 [video frame]")
Consumer Reports tests 2015 Volkswagen Jetta TDI diesel in 'cheat mode,' October 2015 [video frame]
The vehicles using the 2.0-liter TDI turbodiesel engines affected by the settlement are:
- 2015 VW Golf TDI, Golf SportWagen TDI
- 2015 Audi A3 TDI
- 2015 VW Jetta TDI, Passat TDI, Beetle TDI
- 2012-2014 VW Passat TDI
- 2009-2014 VW Jetta TDI, Jetta SportWagen TDI
- 2010-2013 VW Golf TDI
- 2012-2014 VW Beetle TDI
- 2009-2013 Audi A3 TDI
In today's settlement, these are the relevant points that owners need to know—and, perhaps, comment to the court on.
2015 Volkswagen Golf TDI SE
BUYBACKS and LEASE TERMINATIONS FOR OWNERS
Owners who choose to let VW buy back their cars will be paid the "Clean Trade-In" value established by the National Automobile Dealers Association (NADA) as of September 2015, before the scandal broke.
That amount will be adjusted to reflect options fitted to the vehicle and mileage accrued.
Some owners will be able to have their car-loan obligations forgiven or their leases terminated without penalty.
Buybacks could start as early as this fall, or about a year after the scandal became public.
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APPROVED EMISSIONS MODIFICATIONS TO CARS NOT SOLD BACK
If owners and lessees of the affected vehicles prefer, they can wait to see whether modifications are approved to bring their cars into compliance with emissions regulations.
The chances of that happening vary with the vehicle, and are probably close to zero for the 325,000 vehicles without a Selective Catalytic Reduction (urea injection) after-treatment system fitted.
Those vehicles include all 2009-2014 Volkswagen models except the 2012-2014 Passat TDI, and the 2009-2013 Audi TDI.
2012 Volkswagen Passat TDI Six-Month Road Test
The Passat TDIs and all 2015 models from VW and Audi may be fixable with modifications to their SCR systems, but the effects on performance and fuel economy are not known at this time—and won't be until any such fixes are approved by the EPA and CARB.
The modifications, which would be free, would include extended warranty terms and "lemon law" protections in states that have them.
If modifications are not approved for specific vehicles, owners can still choose to take the buyback.
It is likely that such an approval process will take considerable time, as the agencies are likely to be very, very scrupulous in inspecting the operation of the modified engines under all possible real-world circumstances.
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CASH PAYMENTS TO OWNERS (separate from Buyback/Modification choice)
The payment to owners who agree to participate in the settlement of the class-action suit is on top of, and entirely separate from, the buyback-or-modify decision.
Owners of the affected 2.0-liter diesel cars as of September 18, 2015, will be offered between $5,100 and $10,000.
The amount is established by a detailed set of calculations specified by the settlement agreement, and it cannot be reduced by lawyers' fees or other costs, which will be paid by Volkswagen.
2012 Volkswagen Passat TDI Six-Month Road Test
ENVIRONMENTAL MITIGATION and REMEDIATION TRUST
Volkswagen will pay a $2.7 billion in fines that will go toward what's been described as "clean emissions" technology, according to the settlement.
The fines will be used for a trust for environmental remediation, to be administered by a third party, also funded by VW.
Among the items that might be funded are buyback or modifications to older, high-emitting diesel trucks.
Such a plan would likely be modeled on an earlier, smaller program—the Diesel Emissions Reduction Act—to remedy environmental damage by retiring older diesel trucks and also retrofitting older transit buses with the latest emission after-treatment systems.
2015 Audi A3 TDI, New York City, Nov 2014
ZERO-EMISSION VEHICLE FUNDING
Volkswagen is expected to pay a further $2.0 billion in fines toward zero-emission technology.
Possible uses for the environmental remediation funds might be to accelerate the deployment of electric-car fast-charging stations nationwide, for example.
The fines VW pays are to be split between the U.S. Environmental Protection Agency and the powerful California Air Resources Board.
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A disproportionate number of the affected diesel vehicles were sold in that state, and CARB has been a party to the settlement talks since the beginning.
The German carmaker is also settling with regulators in 44 states, including those in California and New York, for a total of $603 million.
It's worth noting that Volkswagen could have been subject to a maximum penalty of $37,500 per non-compliant vehicle, or a total of $18.1 billion in fines alone.
2013 Volkswagen Beetle TDI
The settlement announced today does not apply to a further 85,000 vehicles from Audi, Porsche, and Volkswagen sold with a 3.0-liter V-6 turbodiesel engine.
That larger V-6 diesel was also found to contain "defeat device" software. Discussions over separate settlements for those vehicles are still ongoing.
The vehicles using the engine include five Audi TDI models: the A6, A7, and A8 sedans, and Q5 and Q7 SUVs; the Volkswagen Touareg TDI SUV; and the Porsche Cayenne Diesel SUV.
2012 Volkswagen Passat TDI Six-Month Road Test
Volkswagen of America issued a statement in response, saying:
“We take our commitment to make things right very seriously and believe these agreements are a significant step forward,” said Matthias Müller, Chief Executive Officer of Volkswagen AG.
“We appreciate the constructive engagement of all the parties, and are very grateful to our customers for their continued patience as the settlement approval process moves ahead.
"We know that we still have a great deal of work to do to earn back the trust of the American people. 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.”
The company also noted:
The agreements announced today are not an admission of liability by Volkswagen. By their terms, they are not intended to apply to or affect Volkswagen's obligations under the laws or regulations of any jurisdiction outside the United States.
Regulations governing nitrogen oxide (NOx) emissions limits for vehicles in the United States are much stricter than those in other parts of the world and the engine variants also differ significantly.
This makes the development of technical solutions in the United States more challenging than in Europe and other parts of the world, where implementation of an approved program to modify TDI vehicles to comply fully with UN/ECE and European emissions standards has already begun by agreement with the relevant authorities.
2012 Volkswagen Passat TDI Six-Month Road Test
In a statement, EPA administrator Gina McCarthy said:
Today’s settlement restores clean air protections that Volkswagen so blatantly violated.
And it secures billions of dollars in investments to make our air and our auto industry even cleaner for generations of Americans to come.
This agreement shows that EPA is committed to upholding standards to protect public health, enforce the law, and to find innovative ways to protect clean air.
The total cost to Volkswagen of settling the U.S. lawsuits will run to more than $15 billion.
The company has set aside 16.2 billion euros ($17.85 billion) to cover the costs of the scandal, but it must still resolve dozens of investigations and lawsuits in other countries.
Most analysts expect the final cost to the company to be far higher than the amount allocated to date.
According to Bloomberg, Morningstar Equity Research analyst Richard Hilgart estimates the total cost to VW at 55 billion euros ($60.8 billion).
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