An official announcement made this morning at EPA (Environment Protection Agency), in Washington, has ended speculations on Dieselgate. Volkswagen has signed two related settlements. The first with the United States and the State of California. The other with the U.S. Federal Trade Commission (FTC). In the first one, the German carmaker agrees to buyback and terminate the leases for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles. A total of US$ 10.03 billion will be spent to compensate customers. In the second, it will take measures to “mitigate the pollution from these cars and invest in green vehicle technology”. A total of US$ 4.7 billion will be spent, amounting to the US$ 14.7 billion informed above.
The settlements do not address possible problems with the 3.0 V6 diesel engines that may also use the cheating software. Nor any criminal liabilities.
If you do not remember what the Dieselgate is about, Volkswagen has sold since 2009 units of Jetta, Golf and the Audi A3 with the 2.0 turbodiesel engine EA288. In 2014, researchers from the West Virginia University found out that the NOx emissions of these cars was 40 times higher than they should be. Pressed by the US government, Volkswagen revealed it had a cheating software that detected when the car was under the test parameters of EPA (Environment Protection Agency). In such conditions, the engine would lower its power and comply with environmental regulations. Back to normal use, it would emit 40 times more NOx than it was allowed. NOx is related to serious pulmonary diseases.
The 3 compensation options
There will be 3 ways consumers can be compensated: buy back, lease termination or the emissions modification program.
In the buyback option, Volkswagen will have to pay between US$ 12,500 up to US$ 44,000. These are the retail values the cars had in September 2015. Vehicles involved in Dieselgate have lost a lot of value. But there is more. Some customers had to get loans in order to pay for their cars. If Volkswagen gave them these loans, it will have to forgive them. If they got third party loans, the German manufacturer will have to pay up to 130% of what consumers would be entitled to receive under the buyback option. In an example, if you have to receive US$ 40,000 for your financed Audi A3, Volkswagen may pay up to US$ 52,000 in order for your loan to be fully paid. If anyone managed to sell their Dieselgate cars, they will also be entitled to a money compensation. Part of it, at least, since the most part will be destined to the current owners of the defective vehicles.
If Volkswagen clients prefer to keep their cars, the carmaker will have to fix them. The problem is that Volkswagen still has to submit this fix to EPA. IF it is approved, the German company can offer the service to its customers. In this solution, consumers get their cars fixed and also a money compensation for all the trouble and nuisance. The values of these compensations have not been informed, but they derive from damages caused by Volkswagen’s deceptive advertising.
Lessees will have the option to have their leases terminated with no termination fees. It is also possible to choose the vehicle modification, if it gets approved.
Affected customers can check their eligibility on the websites VWCourtSettlement.com and AudiCourtSettlement.com. Payments will only be available when the settlements take effect. And that will only happen when the court approves the settlements, something expected to happen by October 2016.
Fixing the environment
In the part that aims to repair the damages caused to the atmosphere, Volkswagen has agreed to finance programs of NOx reduction. They will be aimed at places where the Dieselgate cars used to circulate. In order to do so, the German company will put US$ 2.7 billion in a mitigation fund over 3 years. And these fund can be used by states, Puerto Rico, the district of Columbia and Indian tribes that have NOx reduction projects. These projects are expected to fully mitigate the additional NOx emitted by the Volkswagen diesel cars.
Besides that, Volkswagen will have to invest US$ 2 billion in ” infrastructure, access and education to support and advance zero emission vehicles”. Of these US$ 2 billion, US$ 1.2 billion will be destined to EPA-approved investment plans and US$ 800 million to California-specific investment plans, approved by CARB. Any doubts on why Volkswagen intends to launch “over 30” electric cars in the next 10 years? With the infrastructure it has been obliged to help create?
The settlements include “injunctive provisions”. They aim to prevent Volkswagen of ever doing deceptive advertisement again, as well as using any sort of cheating device in its cars. It is not very clear what these “injunctive provisions” do, but they must place an absurd fine. So absurd Volkswagen will feel compelled never to disrespect the law again in order not to bankrupt. You can view the full settlements in this link: www.justice.gov/enrd/consent-decrees.