VW agrees to $1 bil­lion set­tle­ment in scan­dal re­cov­ery

China Daily (Hong Kong) - - MOTORING - By BLOOMBERG

Volkswagen 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 -liter diesel en­gines.

The pre­lim­i­nar y ac­cord calls for the Ger­man au­tomaker to fix or buy back 83,000 Audi, VW and Porsche ve­hi­cles equipped with a so-called de­feat de­vice.

The deal in­cludes pledges by Volkswagen to spend $225 mil­lion to mit­i­gate 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-liter ve­hi­cles has proven to be sticky, as Volkswagen in­sisted t h e e n g i n e s w e r e fix­able and balked at agree­ing to buy back all of the af­fected cars, in con­trast to an Oc­to­ber deal cov­er­ing 480,000 rigged 2-liter autos in the US.

While the set­tle­ment is a step for ward, 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 US Jus­tice Depart­ment said the set­tle­ment reached on 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”.

Re­main­ing is­sues

The US En­vi­ron­men­tal Pro­tec­tion Agency es­ti­mated that the ac­cord reached on 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.

Je a n n i n e G i n i v a n , a spokes­woman for Volk­wag e n’s US u n i t , d e c l i n e d t o com­ment on any dol­lar fig­ure un­til a fi­nal agree­ment has been reached with car own­ers.

De­tails of the agree­ment with car o w n e r s w e r e s t i l l be­ing worked out, and US Dis­trict Judge Charles Breyer, who’s over­see­ing the case i n S a n Fr a n c i s c o , o r d e r e d l aw y e r s t o r e p o r t b a c k t o him on Thurs­day.

T he se ttle­ment marks “an im­por­tant step in the right di­rec­tion to get the DOJ crim­i­nal fine out of t h e w ay, w h i c h w e e x p e c t un­der the Obama ad­min­is­tra­tion,” Arndt Ellinghorst, a L on­don-based an­a­lyst at Ever­core ISI, said in a note to clients. He es­ti­mates the fi­nan­cial hit from that penalty to be $3 bil­lion.

Vo l k s w a g e n i s “c o m m i t - ted to earn­ing back the trust of all our stake­hold­ers and thank our cus­tomers and deal­ers for their pa­tience as the process moves for­ward,” the car­maker said in a state­ment.

Bosch claims

T he se ttle­ment pro­vides for re­pair­ing the cars if the gov­ern­ment ap­proves a fix.

It also covers claims against auto parts sup­plier Robert Bosch, which said spe­cific terms may not be dis­closed un­til a de­fin­i­tive agree­ment is reached and pre­sented to the judge.

“Bosch nei­ther ac­knowl­edges the facts as al­leged by the plain­tiffs nor does Bosch ac­cept any li­a­bil­ity,” the com­po­nent maker said in a state­ment.

Ve h i c l e s c o v e r e d b y t h e 3-liter set­tle­ment in­clude the 2014 Volkswagen Touareg , some 2015 Porsche ve­hi­cles and some 2016 Audi mod­els. Re­call plans for most 3-liter ve­hi­cles in­volve a sim­ple soft­ware up­date, peo­ple fa­mil­iar with the mat­ter have said.

Avoid­ing a full buy­back of all the cars would save the com­pany about $4 bil­lion, the peo­ple said.

Car mak­ing is dif­fer­ent...if they in­sist on mak­ing cars, there is a 99 per­cent chance that they fail.”

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