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VW Emissions Settlement, Is It Enough?

Volkswagen AG has taken another step towards rebuilding relationships with its customers after the Environmental Protection Agency (EPA) discovered the company cheated on vehicle emissions tests.  In September, Volkswagen confessed to installing software in its U.S. vehicles that identified when the vehicles were being tested, thereby altering the car’s performance accordingly to improve test results.  This resulted in the vehicles emitting 40 times the legal amount of pollution.  The consequential settlement includes almost 500,000 U.S. customers and government regulators and is valued at $4.7 billion.  The recent accomplishment by VW in the settlement includes preliminary approval for VW to buy back up to 475,000 vehicles from its customers with diesel engines.  U.S. District Judge Charles Breyer also set a date for potential final approval on October 18 in San Francisco.  The preliminary approval that has just been granted allows owners of 2.0 liter diesel-powered Volkswagen vehicles to determine how much money they are eligible to receive by going online a website.  Announced in June, the settlement is the largest automotive buyback in U.S. history, as well as the most expensive scandal rooted in the auto industry.  The future buybacks, potential vehicle repairs, and financial dues to government agencies account for $10 billion of the total settlement value.

Volkswagen has been working with regulators to establish various solutions to the emission problem, all which must be approved.  Two already discussed solutions are software renovations and the installation of new catalytic converters.  These fixes only apply to the 2.0-liter models, but VW is in the process of developing a proposal to fix 85,000 3.0-liter vehicles.  This comes after an initial proposal was rejected by the California Air Resources Board said a Justice Department lawyer.  This initial proposal included VW and Audi vehicle model years 2009-2016 but was deemed “insufficient” to adequately fix the emission problems.  Since the rejection, VW has been conversing with regulators about an improved proposal said Joshua Van Eaton, a Justice Department lawyer.  Breyer is hoping for updates on the solutions for 3.0 liter vehicles during an August 25 hearing. 

Due to the substantial influx of claims filed against Volkswagen, the German automaker expects to hire 250 to 300 people just to process the settlement claims.  Forty VW Group of America employees will supervise these new employees full time.  Sharon Nelles, a lawyer for VW, said the company could hire twice as many people to process the claims, if needed.  Of the remaining $4.7 billion from the settlement, VW will be required to pay $2 billion over the course of 10 years in order to fund programs that promote the building of electric vehicle charging stations and development of zero-emission vehicle programs.  The last $2.7 billion will be used to support government and tribal agencies to replace old buses or to finance infrastructure conducive to the reduction of diesel emissions.  Separate from this settlement, Volkswagen also made a settlement with 44 U.S. states, the District of Columbia and Puerto Rico, totaling more than $600 million.  Overall, Volkswagen will need to pay $15.3 billion.  Also announced last week, three states filed additional lawsuits seeking hundreds of millions for allegations that VW violated their state environmental laws.

 

Hotten, Russell. “Volkswagen: The Scandal Explained.” BBC News. N.p., 10 Dec. 2015. Web. 28 July 2016.

Shepardson, David. “Volkswagen’s Diesel Emissions Settlement Will Cost $15B.” Claims Journal News. N.p., 29 June 2016. Web. 28 July 2016.

Shepardson, David. “VW Gets Initial Approval for $14.7B U.S. Emissions Settlement.” Claims Journal News. N.p., 28 July 2016. Web. 28 July 2016.