Volkswagen Settles with U.S. for $14.7B Over Diesel Emissions Scandal

The U.S. Justice Department and Volkswagen AG have agreed to a $14.7 billion settlement over the German automaker’s cheating of diesel emissions tests.

The settlement will be filed today in a San Francisco, CA federal court, Bloomberg reported.

As part of the deal, VW will offer one of two options to U.S. owners of diesel VW vehicles affected by the scandal. As one option, VW will offer a buy-back program and pay customers the value of their vehicles prior to the emission scandal, and offer as much as an additional $10,000 as something of an inconvenience fee. The second option will be a recall to fix the affected vehicles. The recall repairs alone are projected to cost $10 billion.

If VW doesn’t achieve a recall rate of 85 percent for the vehicles in violation of federal law by 2019, the automaker must pay an additional $85 million per percentage point short of that stated goal, according to Bloomberg.

Additionally, VW will pay a total of $2.7 billion in fines to the Environmental Protection Agency and the California Air Resources Board. It was the EPA that discovered VW had installed illegal software called a “defeat device” into several diesel models sold in the United States. The illegal software allowed VW cars to pass Clean Air Act standards despite emitting pollutants up to 40 times the federal threshold.

This affected about 482,000 diesel-powered cars from model years 2009-15, which include the Volkswagen Jetta, Beetle, Golf, Passat, and the Audi A3.

The settlement also mandates that VW invest $2 billion in clean energy technologies.

VW had set aside about $18 billion to pay for this scandal, and now nearly $15 billion of that has been earmarked to rectify problems in the United States. VW is still vulnerable to lawsuits in other countries, as well as potential class-action and criminal lawsuits in the United States.

Within two weeks of the EPA publicly announcing that the at-the-time world’s largest automaker had intentionally and systematically installed software designed to cheat emissions testing, VW also admitted to cheating emissions tests on 2.8 million vehicles in Germany.