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VW Crawls Closer to Diesel Resolution with $4.3B Settlement

Any deal would preclude authorities arresting employees.

by on Jan.11, 2017

Volkswagen is inching closer to closing the books on its diesel emissions scandal with a $4.3 billion settlement.

Volkswagen AG appears to be one very expensive step closer to winding up its diesel emissions scandal case in the U.S. after agreeing to pay a $4.3 billion settlement for the impact of rigging its diesels to cheat U.S. requirements.

The proposed deal with the U.S. Justice Department and U.S. Customs and Border Protection forces VW to enter a guilty plea regarding “certain U.S. criminal-law provisions.” Also the agreement, which isn’t final yet, forces the automaker to be subject to an independent monitor for the next three years.

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VW officials said the settlement “is still subject to the approval by the management board and the supervisory board of Volkswagen AG.” The Justice Department declined to comment.

Once approved, it would join the $14.7 billion in earlier settlements the German automaker has already approved, pushing the total past $19 billion. The figure exceeds the $18 billion-plus the company set aside early on for the situation.

In September 2015, the U.S. Environmental Protection Agency accused the maker of selling diesels for years with software that activated required air pollution equipment only during emissions tests. VW has been heavily touting its “clean diesels” in marketing and advertising campaigns since 2008.

(VW gets go-ahead to repair 60,000 late-model diesels. Click Here for the story.)

After a brief investigation, the automaker admitted to programming its diesels to cheat on the emissions tests, releasing less pollution into the air than they actually do, in violation of the federal Clean Air Act. Regulators said that in normal driving the engines emitted up to 40 times more smog-causing nitrogen oxide than the legal limit.

Even though the deal, if accepted, would likely end the saga for VW the Company, individual employees are still clearly in the crosshairs of investigators. In fact, Oliver Schmidt was taken into custody in Florida last weekend, prosecutors there seeking to keep him jailed after arguing that the German resident was a flight risk.

He is the second VW executive arrested in connection with the scandal, in which the carmaker used a so-called “defeat device” to fool government emissions tests while actually producing significantly more pollution than permitted with its two turbodiesel engines.

Schmidt was cited in a Dec. 30 complaint, according to the Associated Press, for conspiring with other VW officials to develop the software used on about 11 million vehicles sold worldwide. That includes 475,000 cars and trucks sold in the U.S. with a rigged 2.0-liter diesel, and another 80,000 equipped with a more upscale 3.0-liter turbodiesel.

(VW reaches diesel deal, but judge warns owners not to strip cars before buyback. Click Here for the story.)

In Germany, several current and former executives, including one-time CEO Martin Winterkorn, remain under investigation, though prosecutors there are also focusing on whether VW management intentionally misled investors in order to maintain the company’s stock price – which ultimately tumbled sharply when the subterfuge was revealed.

In September, 62-year-old James Robert Liang, a former engineer at a VW facility in Michigan, pleaded guilty as part of the ongoing U.S. investigation, agreeing to assist prosecutors in their probe.

In a Miami courtroom on Monday, Schmidt’s attorneys tried to arrange bond and insisted he was cooperating with the FBI investigation. But prosecutors argued that he had actually been evasive and posed a flight risk.

(VW strikes deal on bigger diesel engines. For more, Click Here.)

For its part, VW said this week it continues to cooperate with investigators. The company recently reached a settlement with the EPA and other agencies covering the 3.0-liter diesel, a deal worth an estimated $2 billion. Last June, it settled with the government over the 2.0-liter engine, that agreement worth $14.7 billion. It has also worked out a settlement with U.S. dealers but continues to negotiate with shareholders.

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