Judge Charles Breyer will address the proposed 2.0-liter settlement during today's hearing.
The $15 billion deal covering Volkswagen’s diesel emissions cheating faces a critical test in federal court today before U.S. District Judge Charles Breyer.
The jurist is widely expected to approve the settlement between the German maker and various federal and state agencies. It includes $10 billion to buy back or repair about 475,000 VW vehicles equipped with diesel engines that were rigged to illegally pass emissions tests. The rest of the settlement will go to various programs meant to compensate for the excess pollution those vehicles produced.
The deal only covers a 2.0-liter diesel engine, however. VW is still trying to negotiate a settlement for charges it rigged a 3.0-liter turbodiesel, as well. Meanwhile, the automaker faces a variety of other legal issues that could add billions to the final cost of the scandal – including lawsuits filed this month by three individual states.
(Despite high cost of diesel scandal, VW delivers profitable surprise. Click Here for more.)
The deal before Judge Breyer – the brother of U.S. Supreme Court Justice Stephen Breyer – is “the largest clean air mitigation step in the history of the Clean Air Act,” Deputy U.S. Attorney General Sally G. Yates said during a news conference in Washington, D.C. on June 28th.
The deal was announced a month ago by the U.S. Justice Department, the Environmental Protection Agency, the Federal Trade Commission and the California Resources Board. It is expected to be the largest — but not the last — settlement stemming from the emissions scandal.
VW and its sibling Audi brand still can't sell any of their diesel models in the U.S. market.
Last September, the EPA charged VW with installing a so-called defeat device on those 475,000 diesel models. The maker admitted the subterfuge, revealing it had installed the same software on 11 million vehicles sold worldwide. It subsequently acknowledged rigging a 3.0-liter diesel engine, as well, with it used in about 85,000 Volkswagen, Audi and Porsche models sold in the U.S.
According to federal regulators, the engines can actually produce up to 40 times the legal limit on smog-causing oxides of nitrogen.
VW has begun fixing the 2.0-liter diesels sold overseas and continues searching for an acceptable fix for models sold in the States. A plan to repair the 3.0-liter models was rejected earlier this month by the California Air Resources Board, but VW expects to have an acceptable fix in place this year. The results could impact the ultimate price tag on a separate settlement covering the larger engine.
Coming up with a fix for all of the 2.0-liter diesels may prove difficult, according to various industry sources who expect that the embattled automaker will have to buy back most or all of those vehicles still on the road.
Complicating matters for the automaker: it cannot sell any of its diesel models until they come into compliance with U.S. emissions standards. Before the cheating was revealed, turbodiesels accounted for about 25% of VW’s sales in the U.S.
Ousted VW CEO Martin Winterkorn remains a potential target in various criminal probes.
About $10 billion has been set aside to fund the buyback plan. Another $2 billion will go to help promote the sale of zero-emission vehicles. And the deal sets aside $2.7 billion to fund an emissions remediation program. All 50 states, as well as U.S. territories and Indian tribal governments, will share in that portion of the fund which will be used to replaced older trucks, buses and stationary diesel power sources with newer, cleaner technology.
Along with the settlement for the 3.0-liter diesel engine scam, VW still has a number of other legal challenges to resolve. It faces new lawsuits filed by New York and two other states, as well as claims filed by shareholders who feel the revelations have adversely impacted the value of their investments. Volkswagen AG shares have fallen sharply since last year’s revelations.
(For more on the new 3-state lawsuits, Click Here.)
The automaker has also been telling dealers around the country that it expects to soon announce a compensation package for them to cover business losses resulting from the scandal.
There are still other potential legal problems looming for VW, however. During a joint government news conference detailing the settlement, Deputy U.S. Attorney General Yates said that, “I can assure you our criminal investigation is active and ongoing.”
The Justice Department is continuing to cooperate with German investigators who have their own ongoing probes. That includes one targeting former VW CEO Martin Winterkorn. He was ousted shortly after the emissions cheating was revealed last September.
(GM has its own, mounting legal problems. Click Here for the report.)