VW presents compensation agreement to resolve diesel emissions scandal

Article by Andrew Christian, on April 25, 2016

Earlier this week, Volkswagen has finally entered into an agreement with the US Department of Justice (DOJ) and regulatory agencies to compensate the customers whose vehicles are affected by the diesel emissions cheating scandal that broke out to the public last year. The agreement was supposed to come out on March 24 but was delayed for a month after the carmaker asked for extra time.

The final agreement allows owners to choose either a buyback or a modification subject to government approval. On the other hand, those whose cars are leased have the opportunity to cancel the lease, returning the vehicle to Volkswagen.

About 500,000 cars powered by a 2.0-liter diesel engine in the US are affected. According to Judge Charles Breyer, the car owners are entitled to a substantial compensation from Volkswagen. No specific figures have been disclosed yet. For the 100,000 cars equipped with the 3.0-liter diesel engine, however, no compensation agreement has yet been finalized.

It was late last year when Volkswagen was found out to have been using software that helps it to evade emissions testing procedures and to make its diesel engines appear to be cleaner than they actually are.

Aside from the buyback program, Volkswagen is also compelled to fund programs that will reverse the environmental damages resulting from its cheating activities. This is likely a symbolic compensation than a realistic measure, as Volkswagen is expected to be involved in environmental-friendly projects.

Sierra Club California Chapter Director Kathryn Phillips explained that the horrendous practices of Volkswagen are as dangerous as the smog emitted by its vehicles. As a result, the carmaker shall be mandated to promote environmental awareness in the car industry. Phillips added that Volkswagen needs to focus on building electric vehicles (EVs) to contribute to a cleaner environment.

Financial Impact

Owners of affected models are still clueless about how much they will be compensated. However, speculations have it that Volkswagen will pay each owner about $5,000, which seems too low. Further details of the compensation program will be revealed to the public in June.

Accordingly, the buyback program alone will cost the German carmaker roughly $7 billion, consuming most of the $7.60 billion budget allotted for the settlement of the emission scandal.

Furthermore, having come up with a compensation agreement still does not protect the luxury carmaker from incurring criminal charges.

Volkswagen representative Robert Guiffra is confident that the agreement and its fulfilment reflect the company’s commitment to regaining the trust of its consumers.

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