VW reportedly will buy back up to 500,000 vehicles in Dieselgate

Volkswagen will reportedly buy back up to 500,000 diesel vehicles involved in the Dieselgate cheating scandal. A $1 billion compensation may also be established by the settlement whose announced is set for Thursday.

Volkswagen and U.S. regulators have apparently agreed to a buyback program under which the automaker may pay as much as $5,000 to owners of as many as 500,000 diesel cars caught in the Dieselgate emissions scandal. Dieselgate is a self-inflicted scandal where Volkswagen engineers, knowing their engines could not meet emissions standards for oxides of nitrogen decided to cheat. The compensation figure appeared in a story Wednesday in Die Welt, a German daily newspaper. However, sources familiar with the negotiations mentioned no numbers.

The development team installed software that reportedly developed by Audi in 1999. The program allows vehicles to pass tough U.S. emissions standards by gaming the system. The software was reportedly not implemented until 2006 when engineers, then working on the then-new four-cylinder diesel powerplant, realized the motor could not meet the standards.

The way the software works is this: on determining there is a test underway, the vehicles’ emissions system changes, so the vehicle meets all U.S. state and federal standards. When the test is over, and the vehicle has passed thanks to the cheating software, the system resets to “normal,” where performance and economy increase but emissions tank. In some cases, the vehicles emitted up to 40 times the allowable limits.

Though there has been no official announcement yet, knowledgeable sources told various news outlets of the plans, detailing the plan thoroughly. The announcement of the new plan is scheduled to be made Thursday in the San Francisco courtroom of U.S. District Judge Charles Breyer. Breyer, last month, ordered VW and regulators to come to an agreement by April 21 – Thursday – or face the prospect of a summer trial on all of the issues involved in Dieselgate.

The vehicles involved in the buyback plan include 500,000 vehicles equipped with the VW EA 189 2.0-liter four-cylinder diesel powerplant. The vehicles in which the engine was installed include:

  • Jetta sedan
  • Golf compact
  • Audi A3

The four-cylinder vehicles went on sale in 2009. Their sale continued until 2015 when Dieselgate broke. The buyback plan does not cover about 100,000 3.0-liter, V-6 engines. The bigger powerplants were used on Porsche and Audi SUVs.

Volkswagen admitted six months ago that it had cheated on emissions tests by using what it called a “defeat device” on the affected vehicles. The admission came when the Environmental Protection Agency (EPA) issued a Notice of Violation, outlining the issue and calling for the recall of the vehicles. A sales-hold was placed on unsold vehicles in dealer inventory. Dealers have been sitting on that inventory – and still are – unable to move it due to the order. Dealer grumbling has fostered a revolt of sorts that was launched last week when a group of dealers sued VW seeking damages. The national dealer organization, however, has pushed for working with the automaker.

Other significant pieces of the plan to be outlined Thursday include:

  • A compensation fund, to be administered by Kenneth Feinberg, an attorney specializing in compensation issues, who successfully managed the recent General Motors ignition switch death and injury settlement, as well as the Boston One Fund, established in the wake of the Marathon bombing in 2013. He has also successfully worked with the victims of 9/11.
  • A repair plan for the affected vehicles, provided regulators approve it. Though there is no final fix for the Dieselgate vehicles, Volkswagen apparently believes it apparently has the makings of a plan that will satisfy various agencies.
  • An environmental remediation fund to address issues left in the wake of Dieselgate.

The plan was negotiated, sources said, in the offices of Robert Mueller, former head of the FBI. Now an attorney in private practice, he was named to oversee the more than 500 consumer lawsuits that have been filed against VW. The plan has gained added impetus as the April deadline has apparently loomed. A March deadline was extended by a month to this week.

The settlement package comes at a time when the automaker is still facing racketeering charges, brought by the Department of Justice, which is seeking $46 billion in civil damages. There is no word on how the settlement might affect this action. Nor is there any indication that this might affect any criminal probes, launchd also by Justice. Further, the Federal Trade Commission has just opened a four-count action against VW for false advertising. There are also criminal probes in Germany, France, Italy, South Koreaand India.

The announcement today, if the parameters hold, will add another $1 billion to the pricetag for Dieselgate in the U.S. Also, there is the matter of the remediation fund. And, it is still unclear how much each buyback will cost. Those opting for the buyback may have as much as 24 months to make their decisions. Owners who opt for the settlement package will receive a flat sum over and above the market value of their vehicles at the time the scandal broke in September 2015.

Though the broad outlines of the deal have been discussed, the parties are still involved in the final details of the agreement, and that still might change this before the plans are announced on Thursday.

Reuters reported on this story, using material from a German publication and from sources who are familiar with this action.