VW Diesel Buybacks to Start Soon After Settlement Approval

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By Patrick Ambrosio

Oct. 25 — Volkswagen next month will begin buying back diesel cars equipped with illegal emissions cheating technology following final approval of a $14.7 billion settlement ( In Re Volkswagen “Clean Diesel” Marketing, Sales Practices and Products, N.D. Cal., No. 3:15-md-2672, 10/25/16 ).

Under the settlement, which U.S. District Court Judge Charles Breyer approved Oct. 25, Volkswagen will spend up to $10 billion to compensate people who purchased or leased hundreds of thousands of 2.0-liter diesels, including various model years of the VW Jetta, Passat and Golf. The settlement also requires Volkswagen to commit $4.7 billion for projects intended to offset the excess nitrogen oxides emissions caused by the company’s decision to use illegal defeat devices, which allowed the diesel cars to pass emissions tests despite emitting more pollution than allowed under normal driving conditions.

While VW consumers will have the option of waiting to see if the Environmental Protection Agency and California regulators approve a technical fix to bring the cars into compliance, the settlement also allows them to sell their vehicle back for its pre-scandal value, plus an additional cash payment.

Volkswagen will start implementing the settlement “immediately” and has dedicated staff at each VW dealership to aid consumers in the process, according to Jeannine Ginivan, a spokeswoman for Volkswagen Group of America.

“We expect the first appointments to take place in mid-November, Ginivan told Bloomberg BNA in an e-mail.

Breyer: ‘Fair’ Offer for Consumers

Breyer approved the $14.7 billion settlement between Volkswagen, consumers and the federal government after determining it was “fair, reasonable and adequate.”

“By giving them the September 2015 value of their vehicle, it not only provides sufficient compensation to place class members in the same position they were in pre-disclosure, but also gives them additional compensation,” Breyer wrote in his order approving the settlement.

The combination of the buyback amount and an additional restitution payment is equal to at least 112.6 percent of the vehicles’ retail values as of September 2015, according to an economic analysis conducted by The Fontana Group. That level of compensation will allow consumers to replace their Volkswagen vehicles with an equivalent make and model, while still having enough left over to pay for sales tax and other fees associated with buying a new car, Breyer wrote.

The compensation being offered to Volkswagen consumers, as well as the billions that will be directed toward environmental remediation, serve as a kind of “down payment” on addressing the full scope of issues related to the diesel emissions scandal, according to Daniel Riesel, a principal at Sive, Paget & Riesel PC in New York. Riesel’s practice focuses on environmental matters, white collar defense, civil rights and commercial matters.

“I think by being expansive in this settlement, they [Volkswagen] hope to deal with the several other shoes that are going to fall,” Riesel told Bloomberg BNA. “Volkswagen is still fighting on several fronts: both legal and in the open market.”

The approved settlement only covers 2.0-liter Volkswagen diesel. Volkswagen still faces:

  •  ongoing criminal investigations by the U.S. Justice Department and German authorities;
  •  potential civil penalties from the EPA;
  •  claims brought by owners and lessees over 3.0-liter diesel vehicles sold in the U.S.;
  •  individual state lawsuits; and
  •  litigation brought by Volkswagen’s branded dealers, who reached a tentative $1.2 billion settlement with the automaker that has not yet been approved.

Volkswagen also has seen its U.S. sales struggle since the diesel emissions scandal became public knowledge. The company has reported 11 consecutive months of year-over-year sales declines in the U.S. and has seen its U.S. sales fall 12.5 percent in 2016 compared to the first nine months of last year.

VW Aims for ‘Seamless’ Process

Hinrich J. Woebcken, president and chief executive officer of Volkswagen Group of America, said in an Oct. 25 statement that final approval of the $14.7 billion settlement is an important step in Volkswagen’s “journey to making things right” in the U.S. market.

“Volkswagen is committed to ensuring that the program is now carried out as seamlessly as possible for our affected customers and has devoted significant resources and personnel to making their experience a positive one,” Woebcken said.

Volkswagen is hiring about 900 contract employees to aid customers and dealers with the settlement process, Ginivan told Bloomberg BNA. That includes additional staffers to handle customer support, claims processing and technical support.

“At each dealership, customers will schedule appointments and meet with a designated settlement specialist, hired by Volkswagen, whose sole responsibility will be to complete vehicle buyback and lease termination transactions for customers,” Ginivan said.

Volkswagen owners and lessees will have until Sept. 1, 2018, to submit a claim under the settlement. Claims can be submitted online at http://www.VWCourtSettlement.com. Once consumers submit their claims, Volkswagen will have 10 businesses days to inform them if the claim is complete and 90 days to schedule an appointment for a buyback.

Customer participation in the settlement will be important for Volkswagen’s bottom line, as the settlement requires Volkswagen to either buy back or repair 85 percent of the affected diesel cars by June 30, 2019. For every percentage point the automaker falls short, it would have to pay an additional $85 million into a fund to offset the additional pollution caused by those vehicles staying on the road.

To contact the reporter on this story: Patrick Ambrosio in Washington, D.C. at PAmbrosio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

Breyer’s Oct. 25 order granting final approval is available at http://src.bna.com/jBP.

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