Volkswagen emissions-cheating scandal costs hit $15bn

Volkswagen has agreed to spend $14.7bn (€13.3bn) to get hundreds of thousands of emissions-cheating diesel vehicles off US roads and placate regulators.

The settlements — around $5bn more than estimated — set a US motor industry record but still leave VW facing criminal and civil complaints on three continents.

Under the agreement, announced yesterday, which still requires a judge’s approval, car owners will have the choice of having Volkswagen buy back their vehicles or install whatever pollution-control retrofit is eventually accepted by regulators.

In either case, the owners will get $5,100 to $10,000 each in additional compensation. Some leaseholders will receive roughly half those amounts.

VW will also have to pay $2.7bn to federal and California regulators for a trust to fund pollution-reduction projects and also make a $2bn investment in clean technology.

“This historic agreement holds Volkswagen accountable for its betrayal of consumer trust,” said Elizabeth Cabraser, the lead counsel for the plaintiffs.

The settlement marks a swift resolution between VW and the US, after VW admitted last September to systematically rigging environmental tests since 2009 to hide that its diesel vehicles were emitting far more pollutants than allowed under US and California law.

It also starts a clock for VW to get hundreds of thousands of vehicles fixed or removed from the road.

The record settlement raises questions about whether VW will need to devote more than the €16.2bn it has set aside to cover costs.

“It will take a long time to determine the full cost of the scandal,” said Frank Biller, a Stuttgart-based analyst at LBBW Bank.

“Now it looks as if we might be able to close this chapter, and if that were to be true, it would remove some uncertainty.”

Mr. Biller estimates the total price tag to exceed €26.5bn, including potential litigation costs in other countries.

The agreements, while advancing Volkswagen’s efforts to eventually move beyond its costly diesel-cheating scandal, still leave unresolved other lawsuits on three continents and criminal probes in the US, Germany and South Korea.

The settlement requires VW to get 85% of the cars recalled by June 30, 2019. Otherwise it will have to pay $85m more into the environmental mitigation trust for each percentage point of the shortfall.

Bloomberg