A federal judge has approved a $14.7 billion settlement in the Volkswagen emissions-cheating case, the largest auto-scandal settlement in U.S. history.
The deal, approved on Tuesday, gives about 475,000 owners of Volkswagens and Audis with 2-liter diesel engines the opportunity to have their cars bought back or modified by Volkswagen and to seek additional cash compensation. It also provides billions of dollars to support environmental programs, reduce emissions and promote zero-emissions vehicles.
U.S. District Judge Charles Breyer in San Francisco, who has overseen the litigation against the German automaker, approved the settlement that was proposed in July. He called the deal “fair, reasonable and adequate.”
The VW scandal erupted a year ago when Volkswagen admitted that it had installed “cheat devices” on diesel-powered cars from 2009 through 2015. The devices enabled the vehicles’ engines to emit less pollutants during emissions tests than during normal road use.
The scandal involved nearly 600,000 cars in the United States and 11 million Volkswagen vehicles worldwide.
Volkswagen said on Tuesday that it would start to implement the U.S. settlement immediately and that it was hiring 900 people to help with the buybacks, including one employee to be stationed at each of its 652 U.S. dealerships.
The automaker also has a website, www.vwcourtsettlement.com, with details about the settlement and instructions for people who own or lease affected cars. Terms of the settlement and a list of the vehicles involved also are available at on the court’s website.
The settlement “is an important milestone in our journey to make things right in the United States,” Hinrich Woebcken, chief executive of Volkswagen Group of America Inc., said in a statement.
Under the settlement, owners of certain 2-liter diesel cars made by Volkswagen in the model years 2009 through 2015 will receive between $12,500 and $44,000 from the automaker to buy back their cars.
Leases of those vehicles may be terminated without penalty, and leaseholders also may seek cash payments.
Instead of having their cars bought back, drivers can choose to have VW modify their vehicles to meet emissions standards — once that method is approved by the California Air Resources Board and the Environmental Protection Agency.
Federal officials said such a modification does not yet exist, though the company is working on a fix.
Regardless of whether they choose the buyback or modification option, owners will also receive a cash payment of at least $5,100 and as much as $10,000, depending on the model.
The 475,000 cars affected by the agreement include Volkswagen’s popular Beetles, Golfs, Jettas and Passats. Some Audi A3s also are covered.
The agreement does not cover about 90,000 cars with 3-liter engines that also had the cheating software.
Volkswagen, regulators and consumers’ lawyers are still negotiating a possible settlement for those vehicles.
Under the deal, Volkswagen will pay $2.7 billion into a trust to support environmental programs and reduce emissions, as well as shell out $2 billion over a 10-year period to invest in and promote zero-emissions vehicles.
Volkswagen overall is to spend up to $10 billion to buy back or modify the VW and Audi 2.0-liter diesel vehicles in the United States and to give additional compensation to car owners and lessees. The final figure depends on how many people take advantage of the offer.
“The funds won’t fully compensate owners who thought they were buying a better vehicle, but it is a strong step toward ensuring Volkswagen won’t try to cheat again,” Kathryn Phillips, director of Sierra Club in California, said in a statement. “Volkswagen chose to poison our families with dangerous pollution just to pad its pocketbook.”
When the scandal surfaced, Volkswagen stopped selling diesel-powered vehicles in the United States, and its chief executive, Martin Winterkorn, resigned and was replaced by Matthias Muller, formerly head of VW’s Porsche division.
But the damage to Volkswagen’s reputation was immediate and harsh, and the company’s sales suffered.
Through the first nine months of this year, the company said, U.S. sales of Volkswagen models tumbled 12.5 percent to 231,300 vehicles, down from 264,200 in the same period last year.
Combined U.S. sales of all VW brands, including Audi and Porsche, fell 6.1 percent to 426,000 vehicles in the January-through-September period.
Volkswagen hopes some new models will help the company’s U.S. comeback, notably a midsize sport-utility vehicle called Atlas that’s expected to come out next year and be priced starting at about $30,000.
Jamie Caffrey, 35, said he bought his 2014 Volkswagen TDI Jetta Sportwagen two weeks before the emissions scandal became public knowledge.
He was a second-time VW customer and previously owned a Volkswagen GTI.
When he found out about the problem, “I was really irritated,” he said. “I’m still not happy about it.”
Caffrey, a real estate investor who lives in Los Angeles, said he initially planned to take the buyback but is now reconsidering.
The buyback price takes the car’s mileage into account, and he said he drives a lot.
“Obviously it would be nice to get the cash part of it, but if I have to go and buy a more expensive car … I’m not sure it makes sense,” he said.
Caffrey said he would consider buying another VW. “Next week there could be a scandal about any other carmaker,” he said. “I’m just going to go and find whatever the best car is that’s going to work for me.”
The automaker reached three separate but related settlements that were approved on Tuesday: the first with the U.S. Department of Justice, the California attorney general’s office, the California Air Resources Board and the EPA; the second with the Federal Trade Commission; and the third with owners.
The agreements were developed in parallel.