Volkswagen to pay $14.7 billion to settle emissions cheating in U.S.

Volkswagen Polo IV (front) one of the vehicles of Volkswagen

Volkswagen has agreed to pay nearly $15 billion to settle claims stemming from its diesel emissions cheating scandal in what would be one of the largest consumer class-action settlements ever in the United States.

The proposed settlement, valued at $14.7 billion and involving the federal government and lawyers representing the owners of about 475,000 Volkswagen vehicles, includes just over $10 billion to buy back affected cars at their pre-scandal values, and additional cash compensation for the owners, according to two people briefed on the settlement’s terms.

The cash compensation offered to each car owner will range from $5,100 to $10,000, depending on their market value before Volkswagen’s public admission last September that its supposed “clean diesel” cars had been deliberately designed to cheat on air-quality tests.

Rather than sell their vehicles back to Volkswagen, car owners can also choose to have their vehicles fixed to meet emissions standards, although doing so would probably reduce the engines’ performance and gas mileage. And the methods for fixing the vehicles that Volkswagen has proposed are still subject to approval by the Environmental Protection Agency, one of the federal parties to the case.

The settlement terms, first reported by Bloomberg News, are to be submitted on Tuesday to a federal judge in California whose final approval would be required for the deal to take effect.

Volkswagen would pay $2.7 billion into an E.P.A. fund, the two people said, to compensate for the environmental impact of its cars, which were fitted with software that enabled them to pass emissions tests but exceed legal pollution limits in on-the-road driving.

Volkswagen has admitted that 11 million of its vehicles were equipped with software that was used to cheat on emissions tests. The company is now contending with the fallout.

Volkswagen has also agreed to spend $2 billion on new cleaner-vehicle projects.

Despite the scope of the agreement, Volkswagen’s legal problems would be far from over.

Volkswagen also faces a criminal inquiry by the Department of Justice, a lawsuit brought by the Federal Trade Commission and an investigation by attorneys general in 42 states, the District of Columbia and Puerto Rico. The company is also under investigation in a number of other countries, including Germany and South Korea.

The German automaker acknowledged last year that it had installed illegal software in 11 million cars worldwide that made them capable of defeating pollution tests.

During emissions testing, the cars’ pollution controls systems were turned on, curbing toxic emissions at the cost of engine performance. But those emissions controls were not fully engaged on the road, where its cars spewed nitrogen oxides at up to 40 times the levels allowed under the Clean Air Act.

The proposed settlement requires a review by United States District Judge Charles R. Breyer in California and must go through a period of public comment, during which terms could yet change.

Affected Volkswagen owners are not bound by the settlement, and some may decide to press for better terms.

The settlement does not include 3-liter Volkswagen diesel vehicles, which were fitted with another version of the cheating software.

Nor will the deal address terms for the owners of 85,000 Volkswagen and Porsche cars sold in the United States that had a different type of diesel engine but also had emissions problems.