Volkswagen Dieselgate update: 2.0-liter fix approved, $3 billion settlement pending, U.S. arrest

January 9, 2017

This week, much of the auto world's attention will be focused on the Detroit auto show, but elsewhere in America, in courtrooms and around conference tables, one of the biggest car stories of the past several years--the Volkswagen diesel scandal--is finally, maybe, kinda-sorta coming to an end. Or at least the end of its current chapter.

Here are three of the most important Dieselgate headlines of the past few days:

EPA approves fix for some 2.0-liter diesels: One of the reasons that the Dieselgate fiasco has dragged on for nearly 16 months is because finding a fix for the affected cars has remained elusive. Now, however, the U.S. Environmental Protection Agency has approved Volkswagen's plan to repair some 70,000 of the 475,000 Audi and VW 2.0-liter diesels equipped with defeat devices. Those cars include 2015 models of the Audi A3, VW Beetle, VW Golf, VW Golf SportWagen, VW Jetta, and VW Passat.

Like the scandal itself, Volkswagen's fix is complicated, rolling out in two phases over the course of a year. Phase one is just a software upgrade, which is ready to go right now. Phase two will be another software upgrade, paired with some hardware add-ons, like a diesel particulate filter and a nitrogen oxide catalyst.

Unfortunately, phase two isn't likely to be ready until 2018. Maybe by then, Volkswagen will have figured out how to fix the remaining 105,000 2.0-liter U.S. diesels that were designed to cheat on emissions tests.

Second American employee of Volkswagen arrested:  A manager charged with overseeing engineering and environmental affairs at Volkswagen of America was arrested over the weekend in conjunction with the ongoing Dieselgate investigation. Details of the arrest haven't been revealed, but Oliver Schmidt is expected to be arraigned today in federal court in Detroit. Since one of Schmidt's major duties appears to have been making sure that Volkswagen's U.S. vehicles comply with federal regulations, he might be in a bit of trouble.   

Volkswagen could shell out $3 billion in U.S. fines: Over the summer, Volkswagen announced a $15.4 billion package to fix/buy back Audi and VW 2.0-liter diesels in America, compensate owners, repair the environmental damage those vehicles had caused, and invest in zero-emissions technology. In October, the company agreed to pay $1.2 billion to America's VW dealers. And there's a $1 billion deal pending over the repair/buyback of 3.0-liter Audi, Porsche, and VW diesels.

Of course, that massive $17.6 billion sum doesn't include any of the fines that Volkswagen will be forced to pay by the U.S. government. Reports indicate that an announcement about those fines could come this week, and that the total cost is likely to be around $3 billion dollars. If so, that would bring Volkswagen's U.S. total payout for Dieselgate to around $20.6 billion.

Shortly after Dieselgate first began making headlines in 2015, we estimated that it would cost Volkswagen $25 billion. But by the time you add in the cost of legal fees, the loss of VW sales, and the huge chunk of change that Volkwagen will soon shell out to a marketing firm to begin its inevitable U.S. re-branding campaign, the scandal could cost the automaker $25 billion in the U.S. alone.

Considering that the U.S. is home to only about 5 percent of the total number of vehicles affected by Dieselgate...well, we're just glad that we're not the ones footing the bill.

Note: for purposes of clarity, "Volkswagen" has been used to refer to the Volkswagen Group parent company, while "VW" has been used to refer to the company's popular mass-market brand of automobiles.

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