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Volkswagen To Pay Out $10.2 Billion To Settle Emissions Scandal

By Jaimie Marshall
Published on: 15:31 PST, Jun 23, 2016

Volkswagen is reportedly going to pay out a record $10.2 billion to settle the emissions scandal that rocked the company in 2015. The majority of the money will be paid out to the approximately 482,000 owners of cars with 2-litre diesel engines. Consumers will reportedly have the option of selling their car back to Volkswagen for the pre-scandal value or they can choose to have the company fix the vehicle and then keep it. Owners will reportedly also receive a cash payout of between $1,000 to $7,000 USD, depending on the age of the vehicles and other factors.

The scandal came to light in September 2015, when it was revealed that Volkswagen had been caught deploying sophisticated software that allowed the diesel vehicles to cheat emissions tests and emit up to 4o times more pollution than allowed by law. The Environmental Protection Agency (EPA) found that the Volkswagen vehicles had a “defeat device” that was able to detect when the automobile was being tested and the car went into test mode. While in this mode, the vehicle operated at a much lower emissions level, but when the vehicle was on the road, emissions went far above the legal limits.

Volkswagen was forced to admit that more than 11 million of their vehicles had this override device, and stock in the company plummeted. Countries around the world including the United Kingdom, Germany, France and Italy all launched investigations into Volkswagen and class-action lawsuits were filed in the United States, Canada, and many other countries.

John German, the man who discovered the Volkswagen issue, spoke to Wake Up To Money in October 2015, and explained that he brought the issue to VW’s attention in May 2014, but nothing was done about it. German is the co-lead of the International Council on Clean Transportation (ICCT), which is a non-profit organization whose focus is to reduce emissions in vehicles.

German’s team took a VW Passat and Jetta, along with a BMW X5 out onto a road to simulate ordinary driving conditions. The results shocked them all. German also believes that other companies are using similar technology and should be tested in similar ways.

While Volkswagen only acknowledged the problem in September 2015, German insists that they were given a courtesy copy of the report showing the emissions issue in May 2014. His organization had been investigating VW since 2013. According to the tests that German and his team ran, the X5 recorded low numbers while the Volkswagen cars were much higher.

“The Passat had emissions five to 20 times the standard. The Jetta was worse. It was 15-35 times the standard.”

Cars that were affected by the emissions override include 2009 to 2015 Volkswagen Jetta’s, 2010 to 2015 Volkswagen Golf’s, 2012 to 2015 Volkswagen Passats and Beetles, 2010 to 2015 Audi A3’s, the 2009 to 2014 Jetta SportWagen’s and the 2015 Golf SportWagen.

The fallout from the scandal has been far reaching and is not over. In certain parts of Europe, Ford Motor and Fiat Chrysler were offering car buyers financial incentives to get them to trade in their Volkswagen and buy one of their vehicles. In addition, the value of VW and Audi diesel cars has dropped around 13 percent in value, which hurts those that own the once valuable vehicles. Warburg Research estimates that Volkswagen could lose more than $32 billion between financial payouts, lost revenue, and their damaged image.

Not all of the $10.2 billion will go to consumers. Volkswagen will have to pay around $4 billion in government fines and to promote “zero-emissions” cars. This is only the beginning however as there are still lawsuits and investigations pending worldwide. Due to a gag order that the judge overseeing the case has put in place, Volkswagen has not confirmed the terms of the settlement. Judge Charles Breyer gave the parties until June 28, 2016, to reach a deal and he will announce it once the terms have been finalized.

[Photo by Sean Gallup/Getty Images]

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