Volkswagen agreed on Thursday to fix or buy back nearly 500,000 diesel cars in the United States that are equipped with illegal emissions software.þþBut a settlement announced in federal court in San Francisco left open numerous legal and financial issues stemming from the carmaker’s admission that it rigged diesel vehicles to cheat on pollution tests.þþLawyers in the case are still negotiating the fines that Volkswagen must pay, as well as the compensation that owners will receive. Judge Charles R. Breyer set June 21 as the deadline for Volkswagen to settle those questions with the federal government as well as lawyers for vehicle owners.þþ“There is still a lot of work to be done,” Judge Breyer said.þþIt is already clear, though, that Volkswagen will have to increase the amount it has set aside to cover costs of the emissions scandal, which will easily run into billions of dollars.þþKelley Blue Book, a research firm, has estimated the cost of buying back all the cars in the United States at $7 billion. The company is certain to face additional billions in fines and compensation paid to owners beyond the costs of repairs or buybacks in the United States. And there are many more faulty cars in Europe and elsewhere in the world still to be dealt with.þþVolkswagen has set aside only 6.7 billion euros, or $7.6 billion, against the eventual global costs from the scandal.þþ“If they agree to buy back the cars, the costs will be higher than the current provisions,” said Matthias Hellstern, managing director for corporate finance at Moody’s Investors Service in Frankfurt.þþþVolkswagen faces a theoretical maximum government fine of $18 billion in the United States. Legal experts expect the legal penalties to be much lower, but still in the billions. Judge Breyer said that owners would also receive “substantial compensation.”þþAnd the company could still be hit with criminal charges by the Justice Department, which is investigating Volkswagen’s cheating.þþUnder the agreement announced Thursday, the company will offset some of the environmental damage caused by the cars by investing in clean technologies. The judge did not give details about the form the investment might take.þþIn a statement, Volkswagen said it “intends to compensate its customers fully and to remediate any impact on the environment from excess diesel emissions.”þþWhile many questions remain unanswered, the court hearing on Thursday suggested that Volkswagen and those with claims against it had made substantial progress toward a settlement that would clear up some of the company’s financial uncertainty. It should also help Volkswagen restore some good will with owners of 480,000 Volkswagens and Audi A3 models with the affected 2-liter diesel engines.þþThe models with the cheating software in the United States include Volkswagen, Audi and Porsche cars with 2-liter or 3-liter diesel engines from the model years 2008-15.
Source: NY Times
