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Volkswagen Settles Emissions Lawsuit for $14.7B

Volkswagen will spend $14.7 billion to settle consumer lawsuits and government allegations that it cheated on emissions tests in what lawyers are calling the largest auto-related class-action settlement in U.S. history.

Under the settlement revealed Tuesday by a U.S. District Court in San Francisco, VW will pay just over $10 billion to either buy back or repair about 475,000 vehicles with cheating 2-liter diesel engines. The money also will compensate owners who will get from $5,100 to $10,000, depending on the age of their vehicles.

The German automaker also has to pay governments $2.7 billion for environmental mitigation and spend another $2 billion for research on zero-emissions vehicles.

Volkswagen has admitted that the 2-liter diesels were programmed to turn on emissions controls during government lab tests and turn them off while on the road. Lawyers are still working on settlements for another 80,000 vehicles with 3-liter diesel engines. The company got away with the scheme for seven years.

Volkswagen AG announced the settlement agreements with the Justice Department, the state of California, the Federal Trade Commission and private plaintiffs represented by the Plaintiffs’ Steering Committee (PSC) to resolve civil claims regarding eligible Volkswagen and Audi 2.0L TDI diesel engine vehicles in the United States.

Of approximately 499,000 2.0L TDL vehicles that were produced for sale in the United States, approximately 460,000 Volkswagen and 15,000 Audi vehicles are currently in use and eligible for buybacks and lease terminations or emissions modifications, if approved by regulators, the automaker said in a news release on Tuesday.

Volkswagen will establish a maximum funding pool for the 2.0L TDI settlement program of $10.033 billion. That amount assumes 100 percent participation and that 100 percent of eligible customers chose a buyback or lease termination.

The agreements covering the proposed 2.0L TDI settlement program are subject to the approval of U.S. District Court Judge Charles R. Breyer in California, who presides over the federal proceedings related to the diesel matter.

Volkswagen also announced that it has agreed with the attorneys’ general of 44 U.S. states, the District of Columbia and Puerto Rico to resolve existing and potential state consumer protection claims related to the diesel matter for a total settlement amount of approximately $603 million.

“We take our commitment to make things right very seriously and believe these agreements are a significant step forward,” Matthias Müller, Chief Executive Officer of Volkswagen AG, said in a statement.

“We appreciate the constructive engagement of all the parties, and are very grateful to our customers for their continued patience as the settlement approval process moves ahead. We know that we still have a great deal of work to do to earn back the trust of the American people.

“We are focused on resolving the outstanding issues and building a better company that can shape the future of integrated, sustainable mobility for our customers,” Müller said.

Three agreements have been submitted to the Court for its approval with respect to the proposed 2.0L TDI settlement program: (1) a Consent Decree filed with the Court by the DOJ on behalf of the Environmental Protection Agency (EPA) and by the State of California by and through the California Air Resources Board (CARB) and the California Attorney General; (2) a Consent Order submitted by the FTC; and (3) a proposed class settlement agreement with the PSC on behalf of a nationwide settlement class of current and certain former owners and lessees of eligible 2.0L TDI Volkswagen and Audi vehicles.

The parties believe that the class settlement as presented to the Court will provide a fair and reasonable resolution for affected Volkswagen and Audi customers.

Volkswagen officials said the company continues to work expeditiously to reach an agreed resolution for affected vehicles with 3.0L TDI V-6 diesel engines.

“Today’s announcement is within the scope of our provisions and other financial liabilities that we have already disclosed, and we are in a position to manage the consequences. It provides further clarity for our U.S. customers and dealers as well as for our shareholders,” said Frank Witter, Chief Financial Officer of Volkswagen AG.

“Settlements of this magnitude are clearly a very significant burden for our business,” Witter said. “We will now focus on implementing our Strategy 2025 and improving operational excellence across the Volkswagen Group.”

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