VW Reaches Deal for Emissions-Cheating Audi, Porsche Models

  • Carmaker will fix or buy back 83,000 vehicles from U.S. owners
  • Agreement also covers claims against VW supplier Bosch

Volkswagen Reaches New Deal on Emissions

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-liter diesel engines.

The preliminary 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 U.S. Department of Justice said in statements following a U.S. federal court hearing in San Francisco.

Resolving the issue with the 3-liter 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-liter autos in the U.S. 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 U.S. 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.”

Remaining Issues

The U.S. 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 U.S. and Canada to more than $19 billion. Jeannine Ginivan, a spokeswoman for VW’s U.S. 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 U.S. District Judge Charles Breyer, who’s overseeing the case in San Francisco, ordered lawyers to report back to him Thursday.

The settlement marks “an important step in the right direction to get the DOJ criminal fine out of the way, which we expect under the Obama administration,” Arndt Ellinghorst, a London-based analyst at Evercore ISI, said in a note to clients. He estimates the financial hit from that penalty to be $3 billion.

Volkswagen is “committed 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.

VW shares rose 0.4 percent to 136.85 euros as of 10:15 a.m. Wednesday in Frankfurt. The stock has fallen 16 percent since the revelation of the scandal in September 2015.

Bosch Claims

The settlement provides for repairing the cars if a fix is approved by the government. It also covers claims against VW supplier Robert Bosch GmbH, 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.

Vehicles covered by the 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.

The case is In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices and Products Liability Litigation, 15-02672, U.S. District Court, Northern District of California (San Francisco).

— With assistance by Alan Katz, Joel Rosenblatt, Jennifer A Dlouhy, Margaret Cronin Fisk, Tom Schoenberg, and Christoph Rauwald

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