Volkswagen AG will pay up to $14.7 billion to settle cheating on diesel emissions tests and deceiving customers. The two settlements, one with the United States and the State of California, and one with the U.S. Federal Trade Commission require Volkswagen to offer consumers a buyback or lease termination for 500,000 2009-2015 2-liter diesel vehicles in the U.S.
The plea bargain requires Volkswagen to spend up to $10.03 billion to compensate consumers under the program. In addition, the VW will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.
The affected vehicles include 2009 through 2015 Volkswagen TDI diesel Jetta, Passat, Golf and Beetle models, as well as the TDI Audi A3. VWCourtSettlement.com or AudiCourtSettlement.com.
Volkswagen may also propose an emissions modification plan to EPA and CARB, and if approved, may also offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of a buyback. This seems unlikely at the moment.
Under the U.S./California settlement, Volkswagen must achieve an overall recall rate of at least 85% of affected 2-liter vehicles under these programs or pay additional sums into a “mitigation trust fund.” The FTC order requires Volkswagen to compensate consumers who elect either of these options.
The settlements partially resolve allegations by the Environmental Protection Agency (EPA), as well as the California Attorney General’s Office and the California Air Resources Board (CARB). Under the Clean Air Act, California Health and Safety Code, and California’s Unfair Competition Laws the use of “defeat devices” to cheat on emissions tests is illegal.
The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its “clean diesel” vehicles. The settlements do not resolve pending claims for civil penalties or any potential criminal penalties.
“By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our environment,” said Deputy Attorney General Sally Q. Yates. “This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public’s trust. And while this announcement is an important step forward, let me be clear, it is by no means the last. We will continue to follow the facts wherever they go.”
According to the civil complaint against Volkswagen filed by the Justice Department on behalf of EPA on 4 January 4 2016, Volkswagen allegedly equipped its 2-liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards. The software only turns on full emissions controls during the testing process. During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions.
This “defeat device” results in cars that meet emissions standards in the laboratory, but emit harmful NOx at levels up to 40 times EPA-compliant levels during normal on-road driving conditions. The Clean Air Act requires manufacturers to certify to EPA that vehicles will meet federal emission standards. Vehicles with defeat devices cannot be certified.
The FTC sued Volkswagen in March, charging that the company deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which falsely claimed that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value.
• 2010-2013, 2015 Audi A3 TDI
• 2013-2015 Volkswagen Beetle TDI
• 2013-2015 Volkswagen Beetle Convertible TDI
• 2010-2015 Volkswagen Golf TDI (2- and 4-door)
• 2015 Volkswagen Golf SportWagen TDI
• 2009-2015 Volkswagen Jetta TDI
• 2009-2014 Volkswagen Jetta SportWagen TDI
• 2012-2015 Volkswagen Passat TDI
Volkswagen also announced today that it has agreed with the attorneys general of 44 U.S. states, the District of Columbia and Puerto Rico to resolve existing and potential state consumer protection claims related to the diesel matter for a total settlement amount of approximately $603 million.