VW reaches US emissions scandal deal

Volkswagen is to offer “substantial compensation” and initiate a car buy-back scheme in US following the diesel emissions scandal. However, there are not expected to be any such measures in the UK or Europe. Final details of what the company is offering are expected to be announced in June, but what is offered is expected to be “substantial”. In the 24 hours after VW made this deal public, Mitsubishi announced that 625,000 of its cars came with inaccurate emissions figures. This was followed by the news that Mercedes’ parent company Daimler AG is launching an internal investigation into its own emissions testing.

According to US district court Judge Charles Breyer, who released some VW details of part of a preliminary settlement, the deal includes a buyback offer for nearly 500,000 2.0-litre VW vehicles.

Last year VW told shareholders it had budgeted US$7.3 billion for the potential of penalties associated with the emission scandal, however analysts have long said the cost is likely to be much more. Marc-Rene Tonn, from Warburg Research, VW’s worldwide emissions scandal-related costs could be as much as $32.3 billion.

And while there haven’t been any indications that the company will offer anything Europe, the US settlement could influence what happens over here too.

Because this initial announcement relates mostly to 2-litre vehicles, a second preliminary agreement relating to 90,000 larger vehicles and SUVs is expected soon.

Christian Stadler, Warwick Business School Professor of Strategic Management commented: “What is still uncertain is whether this also resolves issues Volkswagen has with the US Justice Department. There is a pending civil suit and an on-going criminal investigation. If this deal manages to also resolve these issues it is really great for Volkswagen.

“From the perspective of the car owners it sounds like a decent deal. They will be able to sell back the car or get the issue fixed. On top of this they will receive some compensation. It remains to be seen how much this is but I presume that even a modest sum will be welcome.”

Meanwhile Aston Business School’s Professor David Bailey added: “Buying the cars back is a neater solution than trying to fix them”. Professor Bailey supported Warburg research’s point of view, saying he would be surprised if the cost the scandal was less than 30 billion euros.

However, he also said that, with an annual turnover of 200 billion euros and the backing of the German government, VW will be able to afford it.

In the 24 hours after VW made this deal public, Mitsubishi announced that 625,000 of its cars came with inaccurate emissions figures. This was followed by the news that Mercedes’ parent company Daimler AG is launching an internal investigation into its own emissions testing.