On Tuesday, a U.S. judge approved what amount to be the largest corporate settlement in history where Volkswagen AG must settle $14.7 billion with consumers. This came directly from the company's diesel cheating emission scandal where it must repurchase all affected vehicles from those who bought them.
The plan here is to begin repurchasing all polluting cars by the middle of November. We understand over 475,000 polluting diesel vehicles are out there, and Volkswagen needs to buy back each and every one. The company has been trying to move past this scandal for more than a year now, and this ruling will only keep things going a little bit longer.
According to VW back in September of 2015, it installed a secret software in diesel vehicles to help with cheating the emission tests. It allowed cars to come off as clean in testing than they were originally, but it was later found out that these cars had pollution levels 40 times than what is legally allowed.
This revelation alone was enough to get VW in deep water.
Putting An End To The Bleeding
"VW got itself in a lot of trouble on both sides of the Atlantic, basically lying to a host of governmental regulators, its ultimate customers and its many dealers in between," according to Anthony Sabino, an expert on complex litigation. "They're not getting off cheap, but they're stopping the bleeding."
Hinrich J. Woebcken, chief executive of Volkswagen North American division, says this ruling is a significant milestone in the journey of doing the right thing. Furthermore, he went on to add that his company is committed to meeting the needs of affected customers in a seamless manner.
This isn't yet the end of Volkswagen woes. The company has managed to resolve much of its legal problems in little over a year, which is great news for shareholders. However, the company could face a series of trials from consumers with 3.0-liter diesel cars in the U.S.
The U.S. Justice Department and European authorities could also decide to open criminal investigation, and then there are the folks who are part of the many environmental groups. One could say Volkswagen's troubles are just getting started, but only time will tell at this point if the settlement will be the end of the issue.
The 85 Percent
According to reports, the settlement deal requires Volkswagen to recall 85 percent of all affected cars by June 30, 2019. Failure to do so will require the company to pay an additional $85 million into the environmental mitigation trust.
Now, in order for VW to meet its target, drivers must register before September 2018. We guess if some drivers fail to do so by the deadline, they will not qualify for a settlement. Once drivers visit the VW website to register, they will be asked to choose from several buyback options, or to have their cars fixed.
We understand over 311,000 affected owners have been registered so far as of Sept. 30. It would seem Volkswagen is on the road to redemption.
