Throwback Thursday: The 1998 “Defeat Device” Settlement


Volkswagen remains in negotiations with the Environmental Protection Agency, the U.S. Justice Department and California regulators over a solution for hundreds of thousands of diesel vehicles that don’t comply with emissions standards.

While finding an approvable technical fix has proven difficult for the automaker, if a settlement is reached, there will be another hurdle to overcome: how to motivate VW owners to participate in a recall and bring in their car for repairs.

This week I spoke with ex-EPA officials, as well as environmental and consumer advocates, about the best strategies for implementing a recall.

If a deal is reached with Volkswagen, this won’t be the first time the federal government has been involved in negotiating a settlement emissions cheating software. Here’s a look back at 1998’s billion dollar agreement between the Justice Department and heavy-duty engine manufacturers.

The Case: Seven major engine manufacturers, including Caterpillar Inc., Volvo Truck Corp. and Mack Trucks Inc., were alleged to have outfitted truck engines with “defeat devices.” That illegal technology allowed the trucks to pass EPA tests, while increasing nitrogen oxides emissions on the open road. Similar technology is at issue in the Volkswagen diesel case.

The Agreement: A 1998 settlement between the federal government and the engine manufacturers included $83.4 million in civil penalties, which at the time was the largest penalty ever assessed under the Clean Air Act. Rather than a nationwide recall, the settlement required the engine manufacturers to install emissions-reducing software when truck owners brought their vehicle in for an engine overhaul.

At the time the settlement was announced, EPA Administrator Carol Browner said: “A recall is not legally enforceable…this is.”

The Results: The EPA reported in 2010 (12 years after the settlement) that only about 19 percent of the affected diesel trucks ever received the software update, which was voluntary.

Bruce Buckheit, who served as director of the EPA’s Air Enforcement Division from 1996 through 2003, told Bloomberg BNA that there were two major issues that discouraged adoption of the software patch: the fix caused a big hit to vehicle fuel economy and an engine durability issue.

The Reaction: Environmental advocacy groups are pushing for the federal government to do a better job in negotiating any settlement with Volkswagen.

“From our standpoint, that was a fiasco,” Frank O’Donnell, president of Clean Air Watch, told Bloomberg BNA when asked about the 1998 settlement. “They need to learn from that failure and come up with something that is truly enforceable.”