Volkswagen to Pay $1.2 Bn in Emissions Scandal Settlement

Volkswagen to Pay $1.2 Bn in Emissions Scandal Settlement

German automaker Volkswagen has agreed to pay at least $1.22 billion to fix or buy back nearly 80,000 3.0 litre diesel-engined vehicles, according to court documents. The company could be forced to pay up to $4.04 billion if regulators don't approve fixes for all vehicles.

The Volkswagen emissions scandal dates back to September 2015, when the United States Environmental Protection Agency (EPA) issued a notice that the Volkswagen Group had violated the Clean Air act. It found that Volkswagen had intentionally installed software in hundreds of thousands of diesel cars to cheat exhaust emissions tests.

Volkswagen has been barred from selling diesel vehicles in the United States since late 2015.


Volkswagen has previously announced $19.6 billion of provisions to cover the costs of the scandal, and a source told Reuters that it expects the total bill to remain below €20 billion.

Audi, a luxury vehicle manufacturer owned by Volkswagen, said Wednesday that it was reviewing whether to put aside provisions to cover the costs of a settlement. A spokesman for Audi said they were “using the court documents to review what we still need to set aside for the annual accounts.”

Below are some of the key points from the settlement:

  • Owners of 3.0 liter vehicles who opt for fixes will get compensation of between $7,000 and $16,000 from Volkswagen.
  • The automaker will pay a further $500 if the fix affects a vehicle's performance.
  • Owners who opt for a buyback will get $7,500 on top of the value of the vehicle.

The settlement must still be approved by a U.S. judge. However, the U.S. Federal Trade Commission, which had sued VW, voted unanimously to back the deal.

The company says it will be able to fix the 2013-2016 Volkswagen, Audi, and Porsche 3.0 liter vehicles.


German auto supplier Robert Bosch has also agreed to pay $327.5 million to U.S. diesel Volkswagen owners. Consumers filed a lawsuit against Bosch in 2015 after it emerged they had helped design the software used to fool the emissions tests. They alleged Bosch was a "knowing and active participant" in the scandal.

According to the court documents, Bosch will pay $163.3 million to 2.0 liter VW vehicle owners and $113.3 million to 3.0 liter owners. This works out as, on average, $350 each for 2.0 liter owners and $1,500 each for 3.0 liter owners.

Interestingly, Bosch released a statement in which they refused to admit wrongdoing or accept liability. They say they settled so that they can focus on an extensive "transformation process."


As part of the settlement, Volkswagen has agreed to reforms, audits and oversight by an independent monitor for three years to resolve diesel emissions-cheating investigations. Seven of the current and former Volkswagen executives have also been charged with wrongdoing.

But there is some silver lining for the automaker, as they passed Toyota Motor Corp this week to become the world's largest automaker by sales.

As for the industry as a whole, the global diesel engine market is forecast to grow at a CAGR of 8.65% during the period 2016-2020.

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