US judge greenlights initial $1.2bn VW consumer settlement deal for 3-liter engines

The deal offers financial, as well as buy-back and trade-in, compensation for owners of some 78,000 Volkswagens affected by the Dieselgate scandal. The German carmaker has now settled most of its US consumer claims.

German carmaker Volkswagen struck a landmark compensation deal Tuesday after a federal judge in San Francisco approved a preliminary $1.2 billion (1.13 billion euros) fix or buy-back plan.

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The initial deal will see VW compensate the owners of around 78,000 3-liter diesel vehicles caught up in the company's emissions cheating scandal. The agreement will see the carmaker offer customers thousands of dollars in compensation on top of buybacks and repairs.

The deal also covers VW's other brands, Audi and Porsche.

Robert Giuffra, an attorney representing VW, said the settlement "marks an important milestone in Volkswagen's efforts to make things right in the United States."

However, if VW cannot fix the newer models to US regulators' satisfaction, then attorneys representing car owners will likely go back to court to seek buybacks. That could see the German car giant's latest compensation bill for 3-liter engines rise to over $4 billion (3.78 billion euros).

Tuesday's preliminary deal allows car owners to weigh in on the deal and find out whether their vehicle is eligible for compensation. U.S. District Judge Charles Breyer scheduled a final hearing on whether to grant final approval for the deal for May 11.

In a separate settlement, Breyer also granted preliminary approval for a deal that will see German auto supplier Robert Bosch GmbH pay $327.5 million (309.6 million euros) in compensation to VW owners.

Dieselgate: A timeline

The disaster unfolds

About two weeks after Volkswagen admitted behind closed doors to US environmental regulators that it had installed cheating software in some 11 million of its diesel vehicles worldwide, the Environmental Protection Agency shared that information with the public. It was September 18, 2015. The ensuing crisis would eventually take a few unexpected turns.

Dieselgate: A timeline

The boss must go, long live the boss

Volkswagen's then-CEO Martin Winterkorn (above) had little choice but to step down several days after news of the scandal broke. In September, he tendered his resignation, but retained his other posts within the Volkswagen Group. Winterkorn's successor was Matthias Müller. Until taking the reins at VW, Müller had been the chairman at Porsche, a VW subsidiary.

Dieselgate: A timeline

Raiding headquarters

Regulators in the US weren't the only ones investigating VW. Authorities in Lower Saxony, the German state in which VW is based, were also scrutinizing the company. On October 8, state prosecutors raided VW's headquarters along with several other corporate locations.

Dieselgate: A timeline

Hell breaks loose

On January 4, 2016, the US government filed a lawsuit against VW in Detroit, accusing the German automaker of fraud and violations of American climate protection regulations. The lawsuit sought up to $46 billion for violations of the Clean Air Act.

Dieselgate: A timeline

Quit or forced out?

In March, the head of VW in the US, Michael Horn, resigned. In the initial days and weeks after the scandal broke, he was the one US authorities turned to for information. He issued an official apology on behalf of the automaker, asking for the public's forgiveness.

Dieselgate: A timeline

Settlement

On October 25, a US judge approved a final settlement that would have VW pay $15.3 billion. In addition, affected cars would be retrofitted with better, non-deceptive hardware and software, or else VW would buy them back completely from customers.

Dieselgate: A timeline

Imitators

When dieselgate first emerged in 2015, analysts said it was likely other car makers were also cheating tests. But it wasn't until 2017 that other companies were targeted in probes. In July, German authorities launched investigations into luxury car makers Porsche and Daimler for allegedly cheating emissions tests. Others, such as Audi and Chrysler, have also been hit by similar allegations.

Dieselgate: A timeline

Public still supportive

Despite dieselgate, VW has managed to keep the emissions scandal from utterly tarnishing its image. According to several polls, between 55 to 67 percent of Germans continue to trust the automaker. In the US, polls show that roughly 50 percent still believe the German company produces worthwhile vehicles.

Dieselgate: A timeline

Fuming over monkeys

In late January, however, VW suffered another heavy blow over reports that the company experimented on monkeys and made the animals inhale diesel fumes. To make matters worse, a separate experiment that had humans inhale relatively harmless nitrogen dioxide was revealed at the same time. Some media wrongly interpreted this to mean humans were also inhaling toxic fumes.

Further legal battles await

The result of Tuesday's hearing means the carmaker has now settled most of its U.S. consumer claims, having already agreed to spend up to $10 billion to compensate owners of around 475,000 2-liter VW and Audi vehicles caught up in the scandal.

In January, the company also agreed to pay $4.3 billion to settle a US criminal investigation.

However, the German carmaker isn't by any means off the hook. It still faces claims from investors, suits from some U.S. states and pending investigations by the U.S. Securities and Exchange Commission, as well as German prosecutors.

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U.S. prosecutors have also charged seven former and current VW executives with wrongdoing.

Volkswagen's next hearing is in Detroit next week, where it is set to plead guilty to three felony counts as part of its plea agreement with U.S. investigators.

dm/rs (AP, Reuters)

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