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Volkswagen plans to buy back nearly 500,000 2.0 liter diesel vehicles sold in the United States, as part of a recall compensation plan for owners who unknowingly purchased vehicles equipped with “defeat devices” that alter emissions levels.
According to a Reuters report on April 20, U.S. officials and Volkswagen AG have reached a framework deal in which the automaker will offer to buy back nearly 500,000 Jetta sedans, Golf compact models, and Audi A3 models that have been sold in this country since 2009, which contain sophisticated software designed to cheat emissions tests.
The Volkswagen settlement will also include the structuring of a bare minimum $1 billion compensation fund to cover the cost of buying the vehicles back, although the automaker is likely to also propose a repair plan that will have to be approved by U.S. regulators.
The deal is an attempt to resolve the controversy surrounding the Volkswagen TDI “clean diesel” scandal. In September 2015, the manufacturer admitted to the U.S. Environmental Protection Agency (EPA) that the vehicles were equipped with software designed to artificially lower emissions during testing, while increasing the level of pollutants released during normal operations.
Although the Volkswagen TDI “Clean Diesel” vehicles were sold for a premium price, as “environmentally friendly” cars, some researchers from the EPA have recorded emissions levels up to 40 times the allowable rate during normal operation. However, when connected to EPA testing devices showed approved levels.
The Volkswagen recall affected nearly 500,000 diesel vehicles sold in the United States. The problems expanded after the investigation began to also include some 80,000 Audi and Porsche SUV models with bigger 3.0 liter diesel engines. The illegal devices are believed to have been installed in nearly 11 million vehicles across the globe, sparking major concerns about the company’s ethics and business practices.
Over the last several months the German automaker has admitted that it broke the law, and has set aside $7 billion to deal with the emissions scandal.
In the midst of setting funds aside and pressure to propose a fair remedy program, Volkswagen AG is also facing criminal investigations by the U.S. Justice Department and other countries’ prosecutors. The U.S. Justice Department also filed a civil suit against Volkswagen, Audi and Porsche in January seeking up to $90 billion for violations of the Clean Air Act.
According to Reuters, the anticipated proposal for Volkswagen buy backs will involve either cash compensation to owners who wish to either sell their vehicles back, or an offer to have the vehicles fixed. Owners who choose to sell their vehicles back will also receive an additional cash payment on top of the estimated value of the vehicle, prior to when the emission scandal became public in September 2015, according to Reuters.
Owners are expected to have around two years to decide whether to sell back or have their vehicles fixed, if the repair option is accepted by U.S. regulators. Volkswagen attempted to introduce repair processes to fix the vehicles with a software update and a new catalytic converter. However, these proposals were rejected in January by California officials and the U.S. Environmental Protection Agency.
The framework of the deal Volkswagen is proposing to a federal judge today was mediated by former Federal Bureau of Investigation (FBI) director Robert Mueller, who has been appointed to help settle more than 500 civil lawsuits against VW.
Volkswagen’s current proposal is not the final settlement, and some details of the deal are still being worked out that will not be finalized by today. It is also anticipated that the final settlement will include an environmental remediation fund to address excess pollution emitted by the vehicles in the U.S. since 2009. The plan has also not established whether the vehicles VW buys back will ever be able to be resold.