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Volkswagen reaches $4.3 billion settlement with US regulators over emissions scandal

Volkswagen reaches $4.3 billion settlement with US regulators over emissions scandal

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Volkswagen To Lay Off 30,000 Workers After Emissions Scandal
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Volkswagen has reached a final deal with US regulators over its 2015 diesel emissions scandals. The German automaker said it expects to plead guilty to criminal charges and pay the government some $4.3 billion as a settlement. In September last year, the company admitted installing secret software in more than half a million vehicles sold in the US that it used to fool exhaust emissions tests. Investment firm Evercore ISI said in a research note it expects the settlement would “draw a line under all remaining US-related legal risk.”

Volkswagen’s total settlement costs may eventually exceed $20 billion

“Volkswagen deeply regrets the behavior that gave rise to the diesel crisis. Since all of this came to light, we have worked tirelessly to make things right for our affected customers and have already achieved some progress on this path,” Volkswagen Group CEO Matthias Müller said in a statement. “The agreements that we have reached with the U.S. government reflect our determination to address misconduct that went against all of the values Volkswagen holds so dear. They are an important step forward for our company and all our employees.”

The company will plead guilty to a number of charges including conspiracy to violate the Clean Air Act and the obstruction of justice. The $4.3 billion fine would cover criminal and civil charges from the federal government (including environmental penalties) but is separate from the billions the company has set aside for civil suits with individual car owners. Including these, the cost of settling various claims is expected to exceed $20 billion in the US, making it one of the most expensive corporate scandals in history. Volkswagen says it’s currently working with US courts to resolve civil claims for vehicle owners, dealerships, and states in which consumer protection laws were violated.

As part of the settlement, Volkswagen will have installed an independent monitor at the company for three years. The monitor will “assess, oversee and monitor the company’s compliance with the terms of the resolution, including measures to further strengthen Volkswagen’s compliance, reporting and monitoring mechanisms and implementation of an enhanced ethics program.” Volkswagen will also pay $2.7 billion over the next three years into an environmental trust to offset the nitrogen oxide emissions from diesel vehicles in the US, as well as an additional $2 billion over the next decade to be put toward the development of zero-emissions vehicle infrastructure and awareness.

Volkswagen will have an independent monitor installed for three years

News of the settlement comes as prosecutors move to tie up charges against the German automaker. This weekend, VW executive Oliver Schmidt (who ran the company’s regulatory compliance office) was accused of conspiracy to defraud the United States and taken into custody by the FBI at Miami International Airport. Schmidt is charged with defrauding the government and violating the Clean Air Act, and is the second individual to receive criminal charges in the case. The first was Volkswagen engineer James Liang, who pleaded guilty last September to similar charges.

Despite the scandal, the Volkswagen Group achieved record sales last year. Including its Audi, Porsche, and Skoda brands, the company sold some 10.3 million vehicles worldwide in 2016, an increase of 3.8 percent year on year. It’s possible that the VW Group will overtake rival firm Toyota as the world’s largest carmaker by volume, with the Japanese company expected to announce its own sales figures next month.

Update January 11th, 2:25PM ET: Updated headline and contents of the story to clarify that Volkswagen has confirmed the settlement.