VW Cops a Plea

Jamie Lincoln Kitman

Jamie Lincoln Kitman | Jun 27, 2016

Updated June 28, 2016

The end to an ordeal endured by close to half a million American purchasers of Volkswagen turbo-diesel engines may draw to something like a close in federal court tomorrow, but it may not feel like it to all owners.

Today, the Justice Department, on behalf of the EPA, presented Judge Charles Breyer in San Francisco with details of its proposed $14.7 billion settlement with the German carmaker over the sale of 482,000 TDI models in America, cars that weren’t the exemplars of green living they claimed to be.

One of 482,000 TDI models sold in the U.S. (Julie Kasson)

VW had only just achieved long-sought status as the world’s largest carmaker before finding itself in September 2015 forced to admit that seven years earlier it had begun conning federal and California regulators and bureaucrats in arms around the world with its “green” diesel campaign. The company had deliberately and cleverly rigged engine management software in these TDI models – plus around 11 million others just like them sold in other countries – and made them appear to meet emissions regulations when hooked up to static test equipment while secretly directing them to emit up to 40 times the legal limit of NOx (oxides of nitrogen) when actually being driven.

Competition is stiff in the car industry, but for sheer deviousness alone, VW’s felonious acts instantly rose to collective status as the automotive industry crime of the century. Admittedly, the 21st century is not very old, with plenty of time left for even worse violations of the law and public trust, but VW’s initial projection, that it would need only $6 billion to overcome TurboDiesel-gate, is (with the same proviso about the early date) in the running the joke of the century. Today, the company is publicly calculating its losses at $18 billion. But the truth of it is, as Karen Carpenter once sang, we’ve only just begun.

The farce that launched a thousand 'shops.

Along with the company’s shareholders and dealers, VW owners had grown understandably impatient waiting the better part of a year for news of a deal to settle the consumer wrong, part of what began when the company built its first crooked cars all those years ago.

The $10 billion package would see Volkswagen buy back cars for their worth before the scandal broke, in addition offering buyers a one time payout for lost value of between $5100 and $10,000. Or the buyers might choose to keep their cars and have them brought into compliance, and still receive a payment for lost value. This is in addition to the $500 cash payments and $500 dealer credit vouchers TDI owners have already been offered.

"Along with the company’s shareholders and dealers, VW owners had grown understandably impatient waiting the better part of a year for news of a deal to settle the consumer wrong part of what began when the company built their first crooked cars all those years ago." (Car Talk)

To help undo its gross assault on the environment, included in the $14.7 billion figure is $2.7 billion to an E.P.A. fund, and another $2 billion that Volkswagen will spend promoting “green automotive” initiatives and establishing a fund to remediate the million plus tons of additional NOx pollution its cars are responsible for. The latter dovetails nicely with the company’s increasing commitment to electric cars and hybrids; this particular portion of the settlement money might even be seen as a repurposed future marketing cost, as Volkswagen now says it plans to be selling two to three million electric cars and plug-in hybrids by 2025, with 30 models to choose from, triple its estimate of only months ago. If VW gets it right – and we’re betting they could based on the very satisfying experience we had for the previous year in an e-Golf – it will turn out that a few billion of the settlement was used turning lemons into lemonade.

"The details remain to be worked out, though one imagines some sort of a TDI Tribunal sitting in judgment in the case of each and every disgruntled TDI owner. Disappointment is sure to follow." (Dave Friedrich)

News reports suggest, however, that VW will pay owners on a sliding scale, based on the value of their cars before the news of its perfidy broke, introducing issues of mileage, condition, and geographic location (as different markets value the same cars differently), to the equation, so as to almost guarantee that angst and contentious customer/dealer/automaker exchanges are going to continue into the distant future. The details remain to be worked out, though one imagines some sort of a TDI Tribunal sitting in judgment in the case of each and every disgruntled TDI owner. Disappointment is sure to follow.

But enough about the little people. For Volkswagen itself, the end of the nightmare is nowhere in sight. In baseball terms, they’re rounding first base on their way home. So much can yet happen on the way to its corporate happy place of public preening and quiet profitability.

"While no one knows yet what the technical fix for the cars is, the affected cars are certain to become less fuel efficient and slower." (Marcus Mendes Photo)

But we know, for instance, that while no one knows yet what the technical fix for the cars is, the affected cars are certain to become less fuel efficient and slower. No one knows how lousy these fixed cars will be, though consensus seems to suggest that losing five mpg and a couple seconds off the cars’ 0-60 time will be the not inconsiderable price owners will pay. So that’s a bummer. And what if they can’t be brought into compliance? What will Volkswagen do with the up to 482,000 cars that will be returned? Recycle them into new cars? Dump them into the ocean? Or sell them offshore, to countries without environmental regulations? Wither the TDI owners who fail to check in at all? And what of their hyper-polluting cars?

The U.S. government isn’t done with Volkswagen, either. The FTC still has a false advertising case to make and the Justice Department is investigating the criminal complaint it might bring. Dealers are pissed, customers have moved on, and resentment lingers as the nature and result of the proposed fixes are still to be established. Meanwhile, the fate of 76,000 additional units of VW’s 3.0-liter V6 TDI and their owners also await disposition.

A disgruntled TDI owner now prefers the Galactic Empire brand over VW. (Brian C. Drumm Photo)

Overseas, the Korean government recently informed Volkswagen that several of its top executives in Seoul were not free to leave the country. That didn’t sound promising and indeed last week a VW executive was arrested on charges of submitting falsified data, the first of what could be several arrests. Elsewhere on the Korean front, the company is being forced to recall 125,000 cars to refit emissions controls that don’t flout the law, and pay a $12 million fine. And that’s just one country. There’s another ten million plus TDIs sold with the offending software around the world to deal with, along with private actions for those who refuse to sign on to the settlement, the suits from dealers who’ve lost money on account of VW’s misdeeds and whatever else the world’s trial lawyers can think of.

Meanwhile, back in Germany, Europe’s Industry Commissioner Elzbieta Bienkowska has suggested that European owners of the offending VWs ought to be treated like Americans under the settlement being announced tomorrow. To date, VW executives have agreed to repair the vehicles and remove the offending the software – again, with no idea certain about what that will mean for the cars – but won’t be paying owners anything, saying the customers have suffered no loss.

"Volkswagen should voluntarily pay European car owners compensation that is comparable with that which they will pay U.S. consumers," the Welt am Sonntag newspaper quoted Bienkowska as saying. "Treating consumers in Europe differently than U.S. consumers is no way to win back trust," she said, stating the obvious. So American buyers of Volkswagen turbo-diesels may not be happy, and they may still not fully understand what’s going on, but they can rest assured that it could be worse -- for almost 11 million others, it already is.


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