Last month, a federal judge in California gave final approval to a $14.7 billion settlement in the much-publicized Volkswagen emissions scandal case. The settlement, made with consumers and federal investigators, requires the company to set aside at least $10 billion to buy back cars from consumers, as well as a further $4.7 billion to invest in projects supporting lower emissions and to mitigate the effects of the vehicles sold by Volkswagen. It’s certainly a huge settlement – and U.S. District Judge Charles Breyer is pushing for things to be done quickly, reflecting, it seems, the gravity of the situation. How did we get here, though – and amid all the hype and media coverage, what missteps did the company actually make?
It all began more than a year ago...
The Environmental Protection Agency first contacted VW via letter, accusing the company of selling its cars with “defeat devices” installed to evade federal emissions tests. According to the agency’s letter, affected VW vehicles contained software that could sense when the car was undergoing emissions tests, activating the emission controls in time to produce federally-compliant test results. Under normal use, however, the software was dormant and, as a result, emissions could be as high as 40 times the legal limit. From an EPA viewpoint, this violated the Clean Air Act and meant the vehicles were not EPA-approved. VW was ordered to recall 482,000 vehicles in the U.S. alone. That, though, was just the start of VW’s troubles...
On September 20, VW launched an external investigation – and on September 22, acknowledged that more than 11 million cars worldwide were fitted with defeat devices. After public apologies from company heads, class action lawsuits were filed on September 23.
As news broke of the scale of the scandal, inquiries were started in Germany, France, Italy and the UK, while Switzerland banned the sale of VW diesel cars altogether, and VW Australia recalled thousands of cars.
After further investigation, authorities in the U.S. widened the list of cars affected by VW’s defeat devices to include sports cars, including Porches. VW announced it would pay for any carbon dioxide-linked taxes faced by drivers and offered $1000 gift cards as a sign of goodwill. In the U.S., the lawsuits began to stack up.
After hundreds of lawsuits were filed, the U.S. Judicial Panel on Multidistrict Litigation voted to transfer federal cases to California to be overseen by Judge Charles Breyer. MDLs are formed to prevent the huge numbers of similar cases clogging up the court system – but state-level cases continue in several states.
Lawsuits filed over defeat devices installed in Porche vehicles are also transferred into the California-based multidistrict litigation when judges rule there’s no need to create a separate set of lawsuits just for the sports car-related accusations.
VW agrees to the $14.7 billion deal with federal and California authorities. In a statement, Matthias Müller, Volkswagen’s CEO said: “We take our commitment to make things right very seriously and believe these agreements are a significant step forward. We know that we still have a great deal of work to do to earn back the trust of the American people.”
In addition to this, the company agreed to settlements with the attorneys general of 44 states, the District of Columbia, and Puerto Rico to resolve consumer protection lawsuits worth a combined $603 million. The number of affected vehicles is now calculated as 600,000.
Several states – included Maryland, New York and Massachusetts – revealed further plans to sue VW over violations of state environmental laws.
James Liang, a VW engineer involved in the development of the defeat devices, was the first employee found guilty of violating the Clean Air Act. Convicted by authorities, Liang has agreed to cooperate with investigations into the VW Group. Meanwhile, VW has agreed a $1.3 billion deal with franchise dealers in the U.S. who claimed their businesses suffered because of the emissions scandal. Under the terms, approved by Judge Breyer, VW will pay an average of $1.85 million to 652 US-based dealerships.
Which brings us to the present, and Judge Breyer’s final approval of the settlement.
In the end, the settlement is divided into three parts: compensation for consumers who were misled about the emissions of the cars they bought, investment into actual low emissions vehicle projects in the future, and mitigation for the environmental damage caused by the hundreds of thousands of cars driven in the U.S. despite their high emissions impact. The vehicles affected by the settlement include:
- 2009-2015 VW Jetta
- 2012-2015 VW Beetle
- 2010-2015 VW Golf
- 2012-2015 VW Passat
- 2009-2015 Audi A3
At present, the settlement covers 2.0 liter vehicles; 3.0 liter six-cylinder diesel vehicles are covered by ongoing litigation.