VW discusses $10-15 billion settlement to resolve US civil suits on emissions scandal

15 June 2016. 

Volkswagen is discussing with government and private plaintiffs a settlement of $10-15 billion to resolve US civil litigation related to the company's false emission results, MLex has learned.

The amount represents the refunds and repairs VW would pledge to make in exchange for the US Department of Justice, the US Federal Trade Commission, California state agencies and car buyers dropping their lawsuits against the company.

A federal judge on Wednesday extended until June 28 the deadline by which VW and the suing parties need to come to a formal agreement. Negotiators for all sides reached a preliminary deal in April and have said they're on track to meet next week's deadline.

The amount being negotiated is not far from what the FTC is seeking in its lawsuit alleging VW produced false and deceptive advertising to sell diesel cars that weren't compliant with US emission rules. The FTC is looking for compensation that covers 550,000 diesel cars sold at an average price of $28,000, or $15.4 billion.

The Justice Department sued VW on behalf of the US Environmental Protection Agency, accusing VW of violating the Clean Air Act and seeking a payout that some media reports put as high as $48 billion.

The others that have filed civil litigation against VW and are part of the US talks include the California Air Resources Board, the California Office of the Attorney General and a group of plaintiffs' attorneys representing car buyers.

Spokespeople for the DOJ, FTC, California AG's office and VW declined to comment. An attorney representing the car buyers didn't immediately return a call seeking comment.

A US agreement would allow the company to change the narrative of the controversy over the doctored emission tests on "clean diesel" vehicles, which has been dominated by media reports about the cheating and regulators launching investigations and suing the company.

The VW settlement would dwarf Cephalon's agreement last year to pay $1.2 billion over the FTC's claims that the drugmaker illegally delayed generic versions of its sleep disorder drug Provigil, but it would be smaller than BP's settlement with the Justice Department this year to pay more than $20 billion to settle claims over the 2010 Deepwater Horizon oil spill.

Even if the carmaker reaches an agreement, it still could have to contend with lawsuits from other states' attorneys general. Also, the settlement would be separate from the criminal investigation by the Justice Department and would not cover actions by regulators in other countries. Regulators in Germany, the UK, Italy, Poland, Canada, South Korea, Taiwan and Australia also have ongoing probes (see here).

EU industry chief Elżbieta Bieńkowska, who is handling the VW issue for the European Commission, said last week after meeting with EU transport ministers that it is up to national authorities to enforce emission standards and to fine noncompliant companies. She rejected calls for new EU standards and changes to diesel rules.

While there's no EU probe as such into the VW emissions controversy, the European Parliament has launched its own investigation into who exactly knew about it and whether it could have been prevented.

Deal negotiations

VW reached an undisclosed deal with the US plaintiffs in April over 480,000 vehicles with 2.0 liter diesel engines that aren't currently in compliance with federal environmental standards. More details about the projected settlement aren't known because the judge has subjected the negotiating parties to a gag order. Another nearly 100,000 cars with 3.0 liter diesel engines aren't part of the settlement.

The company last year admitted it had used special software, known as a "defeat device," to switch on a car's emission control system when it was being tested, reducing emissions of nitrogen oxide so that they were within legal limits. Nitrogen oxide is a major component of smog and acid rain.

When the testing was done, the emissions control system shut off. Cars then spewed nitrogen oxide at levels as much as 4,000 percent above the legal limit, the FTC said in its suit (see here).

The rigged tests were part of VW's effort between 2008 and 2015 to sell "clean diesel" cars. In a multimillion-dollar advertising campaign that included a television commercial during the Super Bowl, print ads and social media, VW used slogans such as "Diesel – It's No Longer a Dirty Word."