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Emissions scandal: VW to spend R15-billion to buy-back affected cars

2016-04-21 08:56

VW UNDER-FIRE: Embattled automaker Volkswagen will spend $1-billion to buy back 600 000 diesel cars in the US that were fitted with a emissions-cheating device. Image: AFP/ Scott Olson

Detroit - Volkswagen, the US government and private lawyers have reached a deal for the automaker to buy back some of the nearly 600 000 diesel cars that cheat on emissions tests  and spend more than $1-billion to compensate owners, according to a person briefed on the matter.

The "deal in principle" includes a maximum amount of spending, but the final details, like how much each owner would get, are still being worked out, according to the person, who asked not to be identified because the deal hasn't been made public.

Some owners would get a choice of having VW repair their cars or buy them back, but that would vary by model year and engine type, the person said. The deal likely is part of a bigger payment package from VW. It does not yet include plans on how to repair the cars, the person said. The cars can spew out harmful nitrogen oxide at 40 times the allowable limit, the person said.

No plan to fix affected cars

The agreement is likely to be announced Thursday morning during a federal court hearing in San Francisco. The person says it will not include plans to fix the cars. Those plans, and the cost of the fixes, apparently are still under negotiation.

"They've agreed on a maximum amount of money, over $1-billion" for compensation, said the person. "How it's allocated and distributed, that remains to be seen."

Emissions scandal: Will VW’s proposals satisfy regulators?

It means that owners likely won't find out Thursday how their cars will be fixed, nor will they know exactly how much they will get in compensation. With $1- billion to spend, it works out to about $1700 per car. But some owners of newer models who get just a software fix may receive little. About 325 000 owners of older cars that require more extensive repairs likely will get more, because the repairs could affect mileage and performance.

At the hearing, Senior US District Court Judge Charles Breyer also is to discuss a schedule for depositions and information exchange between all sides in the case. He could even set a trial date if he's dissatisfied with the agreement.

VW declined to comment

Representatives for Volkswagen, the lawyers, and the government all declined comment Wednesday (April 20). Wyn Hornbuckle, spokesman for the Justice Department, which has sued Volkswagen, said federal officials would wait until Thursday's hearing before speaking. John Gersten, a spokesman for a law firm representing hundreds of Volkswagen owners, said a confidentiality order barred the firm from making any comment.

The owners filed dozens of lawsuits against VW after it acknowledged in September that it intentionally defeated emissions tests and put dirty vehicles on the road. The cheating allowed cars to pass laboratory emissions tests while polluting on real roads.

Volkswagen told its shareholders in 2015 it had set aside $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 $20-billion in fines for Clean Air Act violations alone, before paying to fix the cars or compensate their owners.

Owners lawyer's playing hardball

Breyer has told the lawyers to come up with repair and compensation plans before Thursday's hearing or face a trial. He wants to know the timing of any fixes and any planned payments to owners, among other details, by Thursday. It was unclear if the plans would satisfy the judge's request.

Lawyers for the owners have said in court papers that if there's no deal, they want an expedited hearing or a trial before the judge to get an order for "equitable relief" that would begin in July. Or they want a full trial that would include punitive damages against VW in the same time frame.

Volkswagen says in documents that it does not believe a hearing or trial is appropriate, apparently because progress is being made toward a fix and compensation. A solution could be revealed at Thursday's hearing.

VW launches internal probe

The first item on Thursday's agenda is a report on the status of fixing the cars and "related discussions." It also includes a request to add the Federal Trade Commission to the case. The FTC has sued VW alleging deceptive advertising. The owners' lawyers also are seeking documents that Volkswagen provided to the law firm Jones Day, which the company has hired to investigate how the cheating happened.

California Air Resources Board enforcement chief Todd Sax in March he doesn't think it's technically feasible to repair any of VW's two-litre diesel engines, under the hoods of most of the models at issue, to meet that state's stringent clean air rules.

Breyer said in March that former FBI Director Robert Mueller told him Volkswagen, government regulators and attorneys for car owners had made substantial progress toward a resolution that would get the polluting cars off the road. He did not provide any details. Breyer appointed Mueller to oversee settlement talks.


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