Volkswagen gets preliminary approval for US diesel settlement

 A US flag flutters above a Volkswagen dealership in Carlsbad, California, May 2, 2016.
A US flag flutters above a Volkswagen dealership in Carlsbad, California, May 2, 2016.PHOTO: REUTERS

SAN FRANCISCO (AFP) - A federal judge in California granted preliminary approval on Tuesday to a US$14.7 billion  (S$19.9 billion) settlement over Volkswagen’s emissions cheating scandal.

At the close of a hearing in San Francisco, US District Judge Charles Breyer praised the “enormous effort” made by both sides.

The development signaled that the German automaker was more than likely to put one episode within the massive scandal behind it definitively later this year.

“There’s been an enormous effort to achieve a series of goals,” said Breyer. “I think these goals have been achieved,” he added, setting an Oct 18 deadline for final approval of the deal.

The settlement, the terms of which were announced last month, concerns nearly a half-million 2.0 litre Audi and Volkswagen diesel cars sold in the US between 2008 and 2015.

Regulators announced last year that the vehicles had been deliberately calibrated to deceive laboratory tests for nitrogen oxide emissions.

Although Volkswagen and Audi marketed the cars – which included models of Beetle, Golf, Jetta, Passat and the Audi A3 – as clean, they emitted up to 40 times the legally permissible amounts of the poisonous gases while on the road.

The company admitted to equipping 11 million cars worldwide with the so-called “defeat devices” on the cars.

A separate settlement concerning some 16,000 Volkswagen, Audi and Porsche cars with 3.0 litre engines also equipped with illegal defeat devices was rebuffed earlier this month by officials in California.

The California Air Resources Board found that modifications proposed by Volkswagen were insufficient in that case.

In the settlement for two-liter cars, owners will be eligible for buybacks, penalty-free lease terminations or free modifications to fix the vehicles’ emissions. All participants are also to receive cash payments.

In addition to US$10 billion for compensation to owners, Volkswagen will also create a US$2.7 billion fund for environmental remediation, and provide US$2 billion to promote the use of  “zero emissions” vehicles within the United States.

The settlement involves the US Justice Department and Federal Trade Commission as well as the State of California and private plaintiffs.

After the scandal broke in September, consumers sought to bring as many as 500 class-action lawsuits in different states. But a judicial panel in December transferred all related federal cases to the Northern District of California.

In moving to settle the case last month, plaintiffs’ lawyers praised the swift pace of the resolution, noting that it had been reached only nine months after the scandal broke.

Resolving the two-liter and three-liter cases will by no means put all of Volkswagen’s legal woes behind it. The company says it has reached settlement agreements with the attorneys general of 44 states, the District of Columbia and Puerto Rico over consumer protection claims.

However, New York, Massachusetts and Maryland this month brought separate civil suits over the pollution defeat devices that suggested that current Volkswagen chief executive Matthias Mueller and former CEO Martin Winterkorn may have known about the efforts to mask the vehicles’ illegal emissions levels.

Both men have denied involvement in the emissions deceptions.

The company also faces civil and criminal action outside the United States. In Germany town of Braunschweig, prosecutors are also investigating Volkswagen’s diesel emissions practices.

Volkswagen’s US sales were down 5.7 per cent in the first quarter of this year, largely due to the diesel scandal, according to Volkswagen.