Volkswagen Diesel Emissions Settlement Results in $4.3B Payment, Guilty Plea

Volkswagen has reached a settlement with the U.S. government, which will result in a payment of $4.3 billion to resolve civil and criminal charges over the installation of emissions test cheating software in hundreds of thousands of its TDI diesel vehicles. 

The Volkswagen diesel emissions settlement was reported on Tuesday by Reuters News, and comes on top of the $14.7 billion the German automaker has already agreed to spend to address the problems with the vehicles. In addition, the company is expected to plead guilty to a number of criminal violations regarding its TDI diesel vehicles.

In September 2015, Volkswagon 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 Volkswagen and Audi 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.

The agreement must still be approved by a U.S. judge, and will include $4.3 billion in additional payments beyond the estimated $10 billion that will be spent to buy vehicles back from U.S. owners who do not want them anymore, and another $4.7 billion that will be paid to mitigate pollution and invest in zero-emission technology.

The VW diesel settlement agreement also comes just days after the arrest of Oliver Schmidt, a VW executive who was in charge of the company’s environmental and engineering office in Michigan. Schmidt was arrested on Monday in Florida, while attempting to return to Germany. He has been charged with fraud and conspiracy in relation to his failure to disclose the emissions cheat software to U.S. regulators.

Schmidt is the second VW employee to be arrested and face criminal charges in the U.S. as part of the diesel emissions scandal. The first was James R. Liang, an engineer who plead guilty in September to charges of conspiracy to commit wire fraud and violation of U.S. clean air laws. He is awaiting sentencing and took a plea deal to become a cooperative witness against his former employer.

The settlement, if approved, does not resolve numerous individual and class action lawsuits filed by VW owners and investors. VW has vowed to settle and resolve those claims swiftly.