VW rigging deal gives owners choice to sell back car or get it fixed
TORONTO/SAN FRANCISCO Canadian owners of vehicles implicated in Volkswagen AG’s emissions-rigging scandal will be able to either sell their vehicle back to the automaker or have it fixed under an agreement reached Thursday.
The deal, hammered out in a U.S. court, did not provide specifics on how much car owners will be paid or how the vehicles will be repaired, but Senior U.S. District Judge Charles Breyer said it will include “substantial compensation.”
The agreement will apply to Canadian vehicle owners as well — about 107,000 vehicles were affected in Canada — and the company expects to make the details public in June, said Volkswagen Canada spokesman Thomas Tetzlaff.
“Volkswagen is committed to earning back the trust of its customers, dealers, regulators and the public,” Tetzlaff said in an email. “These agreements in principle are an important step on the road to making things right. As noted today in court, customers do not need to take any action at this time.”
Environment and Climate Change Canada spokeswoman Barbara Harvey said the department will use the U.S. resolution “to help inform next steps for Canada.”
Breyer, the U.S. judge in San Francisco, said the terms of the agreement were still being worked out and ordered all sides to keep them confidential during negotiations.
It will include a fund for corrective efforts over the excess pollution, and Volkswagen will be required to commit other money to promote green automotive technology, said Breyer, who has not yet formally signed off on the deal.
“I am extremely pleased to report that the parties have come up with a concrete plan by today’s date, and I would like to publicly thank them,” Breyer said.
Volkswagen would spend just over US$1 billion to compensate owners, but did not detail a vehicle fix in the agreement, a person briefed on the matter said Wednesday.
In the U.S., the deal affects the owners of about 482,000 Volkswagens with two-litre, four-cylinder diesel engines who can choose repairs or buybacks. Those with leased vehicles, including VW Jetta, Golf and Passat models dating to the 2009 model year, will be able to give the cars back.
But no agreement has been reached yet on Volkswagen, Audi and Porsche vehicles with 3-litre, six-cylinder engines — an additional roughly 90,000 U.S. vehicles.
Experts say fixing older-model diesels will be complicated and costly and most likely would cut their performance and fuel mileage. Those are two main reasons most customers bought the diesel cars.
The agreement does not settle lawsuits by state and local governments, who also are seeing billions from the company. In addition, a handful of Volkswagen dealers have sued over financial losses from diesel cars sitting on their lots that can’t legally be sold until the emissions issues are resolved.
Vehicle owners and the U.S. Department of Justice sued the company after it acknowledged in September that it intentionally defeated emissions tests and put dirty vehicles on the road.
Analyst Marc-Rene Tonn at Warburg Research estimated the direct financial impact on Volkswagen from the emissions scandal worldwide at 28.6 billion euros (US$32.3 billion). The company also faces losses from declines in market share and having to lower its prices to keep customers.
Any U.S. settlement could influence what happens in other countries, he said. “Very generous payments to U.S. customers may add to some greediness here, too.”
Shares in Volkswagen closed up 5.1 per cent in Europe on news of a deal with the U.S. government.
Volkswagen told its shareholders last year it had set aside US$7.3 billion to help defray the potential costs of a recall or regulatory penalties. Most outside observers have said that figure is likely far too low. The company faces as much as US$20 billion in fines for Clean Air Act violations alone, before paying to fix the cars or compensate their owners. The U.S. Justice Department and Environmental Protection Agency also are weighing potential criminal charges against the company and senior executives.
The court hearing Thursday was expected to touch on a request to add the Federal Trade Commission to the case.
The FTC sued Volkswagen in March alleging deceptive advertising over a seven-year period.
Details of the agreement must be made public on or before June 21.
After that, owners will get the chance to comment, the judge said.