Volkswagen to pay $1 bn for cheating-scandal settlement

Volkswagen AG took an important step in digging out from its emissions-cheating scandal by reaching a $1 billion agreement to settle lawsuits over tainted 3.0-litre diesel engines.

The preliminary accord calls for the German automaker to fix or buy back 83,000 Audi, Volkswagen and Porsche vehicles equipped with a so-called defeat device. The deal includes pledges by Volkswagen to spend $225 million to mitigate an environmental damage the autos caused and $25 million to support the use of zero-emission models, the California Air Resources Board and the US Department of Justice said in statements following a US federal court hearing in San Francisco.

Resolving the issue with the 3-litre vehicles has proven to be sticky as Volkswagen insisted the engines were fixable and balked at agreeing to buy back all of the affected cars, in contrast to an October deal covering 480,000 rigged 2-litre autos in the US While the settlement is a step forward, it will potentially add to the 18.2 billion euros ($18.9 billion) Volkswagen has so far set aside to cover the damages from years of duping consumers and regulators by manipulating emissions tests in a scandal involving 11 million diesel vehicles worldwide.

Volkswagen is still under criminal investigation in the US and on the hook for outstanding civil claims from several states. It also faces hundreds of investor lawsuits in Germany and is the subject of a criminal probe there as well as in South Korea.

The Justice Department said the settlement reached Tuesday “does not resolve any pending claims for civil penalties, nor does it address any potential criminal liability,” nor does the deal “resolve any consumer claims, claims by the Federal Trade Commission or claims by individual owners or lessees who may have asserted claims in the ongoing multidistrict litigation.”

The US Environmental Protection Agency estimated that the accord reached Tuesday will cost Volkswagen $1 billion, which would increase the amount it has agreed to pay to resolve claims in the US and Canada to more than $19 billion. Jeannine Ginivan, a spokeswoman for Volkswagen’s US unit, declined to comment on any dollar figure until a final agreement has been reached with car owners.

Details of the agreement with car owners were still being worked out, and US District Judge Charles Breyer, who’s overseeing the case in San Francisco, ordered lawyers to report back to him Thursday.

Reuters