Volkswagen to pay $14.7 bn settlement and buy back autoes from consumers

Department of Justice says carmaker will pay billions to determine asserts generated by emissions rigging scandal and buy automobiles from consumers at pre-scandal prices

Volkswagen has agreed to pay $14.7 bn to settle claims generated by its emissions rigging scandal and to buy back automobiles from customers at pre-scandal prices, the Department of Justice announced on Tuesday.

Volkswagens wrongdoing constituted the most flagrant violations of our customer and environmental laws in our countrys history, deputy US attorney general Sally Yates said announcing the agreement. We cannot undo the damage thats been done to our air quality, but we can offset that damage.

One piece of the settlement, an estimated $10 bn due to consumers, was reported last week and would come to an average payout of about $21,000 per vehicle owner for the 500,000 Americans affected.

The rest of the $14.7 bn includes a $2.7 bn settlement paid to the Environmental Protection Agency( EPA) and$ 2bn in investment to subsistence zero-emission vehicles. The Federal Trade Commission( FTC) also formally banned the software used to beat the emissions exams.

The fines are not the end of VWs woes. A Department of Justice criminal investigation is ongoing, as is the inquiry of the German government. If settlements with General Motor and Toyota are anything to go on, the cost of the criminal case to VW could exceed another$ 1bn, said Carl Tobias, Williams chair in law at the University of Richmond.

Whats critical is this is an historic settlement surely in terms of quantity but also in terms of what it encompasses or tries to cover, said Tobias. This is a real step forward: people who own the vehicles seem to be get a pretty good deal especially with the buybacks and the compensation on top of that.

This is the largest monetary mitigation obligation in the history of the Clean Air Act, said Yates. The settlements do not address any possible criminal liability, although I can assure you that our criminal investigation is active and ongoing.

Volkswagen has to swallow a $15 bn pill, but it needs to take this medication in order to move on, said Jessica Caldwell, director of industry analysis for automobile pricing firm Edmunds. This massive fiscal hit wont magically make VWs difficulties disappear overnight, and it still has a long road ahead to repair its reputation among automobile shoppers. The company got a head start earlier this month by announcing a long-term commitment to electrification, but it will be a long time before shoppers will trust VW as an environmentally friendly brand.

Yates said the settlement was fitting given the damage wrought by the alleged cheating. We cannot undo the damage it has done to our air quality, she said. We cant suck the NOx out of the air.

The settlements will be meted out among the various plaintiffs, among them the nation of New York, which partially outlined its own employ of the awarded funds: $115 m for environmental projects to improve New Yorks air quality, and $30 m to the states general money. Make no mistake: we will continue to investigate and pursue Volkswagen for its violation of our environmental laws, and we will seek the imposition of additional penalties in quantities sufficient to ensure that Volkswagen and any other car manufacturer is complying with the standards required of them, said New York us attorney general Eric Schneiderman.

The affected vehicles are the 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.

I want these treaties to remind every American that the EPA is on the job and we have your back when companies break rules designed to protect your health and when cheaters stack the deck against business that are consistent with the law, said EPA administrator Gina McCarthy.

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