US judge approves VW’s $14.7bn deal to compensate for emissions scandal

Volkswagen’s $14.7bn (£12bn) deal with the US government to pay for last year’s diesel emissions scandal has been approved by a judge, putting into motion the terms of the agreement.

From mid-November the German automaker is set to begin buying back polluting cars from American consumers.

US District Judge Charles Breyer in San Francisco signed off VW’s settlement with federal and California regulators and the owners of the 475,000 polluting diesel vehicles in a pivotal moment for VW, which is trying to move past the scandal that has engulfed it for more than a year.

VW admitted in September 2015 to installing secret software in its diesel cars to cheat exhaust emissions tests and make them appear cleaner in testing than they really were. In reality, the vehicles emitted up to 40 times the legally allowable pollution levels.

The scandal has had an impact on the entire auto industry with carmakers increasing the size of their engines following the introduction of stringent European car-emission standards. 

VW CEO Matthias Mueller told reporters in Berlin that Breyer’s approval was “an important milestone for us on the way towards clearing up the problem that we caused some time ago.”

But he rejected suggestions from car owners who thought the settlement did not provide enough money, saying it “adequately and fairly compensates” them. Owners will get the pre-scandal “trade in” value of the vehicle and $5,100 to $10,000 in additional compensation.

“Given the risks of prolonged litigation, the immediate settlement of this matter is far preferable,” Breyer wrote.

VW agreed to spend up to $10.03bn on the buybacks and owner compensation, and $4.7bn on programs to offset excess emissions and boost clean-vehicle projects.

The settlement was reached with the US Justice Department, Federal Trade Commission, the state of California and vehicle owners who had filed a class action lawsuit against VW. The carmaker admitted to misleading regulators and still faces an ongoing criminal investigation.

It represented the largest civil settlement worldwide ever reached with an automaker accused of misconduct.

While huge, the approved deal was still smaller than the $246bn settlement reached by cigarette makers with 46 US States in 1998 and the $53bn by BP to address costs and penalties arising from the 2010 Gulf of Mexico oil spill.

In total, Volkswagen has agreed to date to spend up to $16.5bn in connection with the scandal, including payments to dealers, states and attorneys for owners. The scandal has rattled VW’s global business, harmed its reputation and prompted the ousting of its CEO.

The settlement covers 2.0 litre diesel Beetle, Golf, Jetta, Passat and Audi A3 cars from the 2009 through 2015 model years. Up to 490,000 people will take part in the settlement because some vehicles had multiple owners.

VW spokeswoman Jeannine Ginivan said the automaker expects to begin buying back vehicles in mid-November. VW has hired 900 people, including one to be stationed at each dealership, to handle buybacks.

Despite the scandal, in July it was revealed that VW overtook Toyota to become the world’s largest auto manufacturer partially due to production stoppages affecting the latter. 

Recently released figures have shown that just one in ten VW vehicles in the UK have been fixed in the year since the scandal broke. 

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