Volkswagen to pay $14.7 bn in US emission-cheating case

German carmaker Volkswagen AG will be paying $14.7 billion to owners of its vehicles in the US to settle civil liability charges over its pollution cheating diesel vehicles, in what could be the largest in VW's penalties worldwide.

Under the settlement, VW will buy back cars with 2.0-liter diesel engines armed with so-called defeat devices used to beat emissions tests.

VW had reached a deal with consumers and regulators including the US Environmental Protection Agency and the Federal Trade Commission in June, under which car owners will be offered $5,100 to $10,000 each in compensation along with the option of a buyback or a fix.

Volkswagen has earmarked $19.5 billion (17.9 billion euros) to cover costs related to the scandal.

Besides Tuesday's settlement approved by US District Judge Charles Breyer in San Francisco, VW has committed $1.2 billion for US franchise dealers and $603 million to California and 43 other states over violations of consumer-protection laws, which take the total cost of settlement in the US to almost $16.6 billion.

Judge Breyer set aside objections to the agreement, saying that few VW owners complained "and their substance does not call into doubt the settlement's fairness.'' He called the settlement fair, reasonable and adequate and said it achieved the primary goal of getting polluting cars off the road.

"There is no just reason for delay," Breyer said in the order, which allows the buybacks to begin immediately.

Volkswagen's payout for settlements is among the largest in corporate history, exceeded by the $246 billion agreement between the tobacco industry and U.S. states in 1998 and the $38 billion BP has spent so far over the 2010 oil spill in the Gulf of Mexico to resolve government probes as well as claims for private property and economic losses.

"VW got itself in a lot of trouble on both sides of the Atlantic, basically lying to a host of governmental regulators, its ultimate customers and its many dealers in between," said Anthony Sabino, a law professor at St. John's University in New York and an expert on complex litigation. "They're not getting off cheap, but they're stopping the bleeding."
The president of the German carmaker's US unit called the settlement "an important milestone in our journey to making things right." VW is committed to carrying out the program as seamlessly as possible for customers, Hinrich J. Woebcken said in an e-mailed statement.

While VW has resolved much of its legal exposure in just over a year since the emissions cheating was revealed, the company still faces a potential trial with owners of 3.0-liter diesel cars in the U.S., shareholder claims, environmental lawsuits by multiple states and criminal investigations by the US Justice Department and European authorities.

"Volkswagen remains focused on resolving other outstanding issues in the United States and continues to work towards an agreed resolution for customers with affected 3.0L TDI V6 diesel engines," Mr. Woebcken said.

The carmaker agreed in the U.S. settlement to devote as much as $10 billion to buy back affected models and compensate drivers. It will also pay $2.7 billion to federal and California regulators to fund pollution-reduction projects, and contribute $2 billion toward investment in clean technology.

The settlement with the U.S. government requires VW to get 85% of the cars recalled by June 30, 2019. If it fails to do that, it will have to pay $85 million more into the environmental mitigation trust for each percentage point of the shortfall. It will also have to pay an additional $13.5 million into the trust for each percentage point it falls below the 85 per cent target in California.