Volkswagen To Reach $14.7 Billion Settlement Over 2015 Emissions Scandal

By Nicole Encalada, International Business Writer

Only a year after the Environmental Protection Agency (EPA) uncovered that German auto maker, Volkswagen Group, had been using a cheating software allowing their heavily polluting 2-liter diesel engines to pass emission tests, they are close to reaching a settlement with a US district judge.

The defeat devices engineered into their vehicles brought down nitrogen oxide emission levels to the legal standard in the US during testing.

However, when leaving the testing facilities, the cars produced a startling 40 times more nitrogen oxide than was emitted during the emissions tests.

High levels of nitrogen oxide can prove to be harmful to humans, according to the US EPA. It has been estimated that this software was used in 11 million Volkswagen vehicles worldwide, 500,000 in the United States. The defeat devices were uncovered in multiple Volkswagen brands, including Audi and Porsche vehicles.

The scandal, commonly referred to as “dieselgate”, started in 2009 and ended in 2015 when Volkswagen’s unethical practices were finally uncovered.

Currently, Volkswagen’s proposed settlement to compensate Volkswagen owners and dealers, is currently pending on the decision of U.S. District Judge, Charles Breyer.

The automaker has proposed a $10.33 billion to buyback cars from owners and owners will be eligible for additional compensation of $5,100 to $10,000, according to Reuters.

The San Francisco Judge recently commented that he was “strongly inclined” to approve of the buyback settlement. The official decision will be issued by October 25.

While Judge Breyer is leaning towards the approval, the EPA must also grant their approval for Volkswagen to be able to sell its diesels from 2015. The EPA has also taken it upon themselves to further investigate 3-liter diesels and are currently working towards making them safer for consumers.

The company, despite its impending settlement, still faces fines from the US government as well other expenses related to the scandal. Volkswagen is set to pay over $600 million to 44 US States as well as $2 billion on zero-emissions vehicle promotion and infrastructure, and about $2.7 billion to negate diesel pollution. Along with its larger settlement, Judge Breyer must also approve of these smaller settlements.

While the added expenses are racking up to be far more than its original settlement, Volkswagen has agreed to spend up to $16.7 billion to mitigate the situation. The company’s lawyer, Robert Giuffra, commented that Volkswagen was adamant on coming up with a solution, “Under any circumstances, this is a fair and reasonable settlement”.

When news of the scandal initially broke, Volkswagen sales dropped. Even resale values fell far more for diesel engine cars than those without the diesel engine.

Needless to say, Volkswagen’s stock price plummeted after it was revealed by Bloomberg that the US Department of Justice was planning on laying a harsh fine on Volkswagen.

Swapalease, a lease marketplace, released data stating that Volkswagen searches on its website dropped down to 56 percent from the previous 88 percent.

It wouldn’t be surprising if dieselgate affected the company’s reputation permanently, but in an interesting turn of events, a survey conducted on CarGurus.com said 42 percent of people would buy another Volkswagen while only 21 percent said they would not.

Even sales did not fall as low as the company feared. The diesel engine vehicle made up about 25 percent of the automaker’s sales but sales only dropped about 12.5 percent after the scandal.

According to US News, even industry experts agree that the company will eventually be able to rise above the scandal.

A version of this article appeared in the Tuesday, October 25th print edition.

Contact Nicole at

nicole.encalada@student.shu.edu

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