Volkswagen pleads guilty to felonies, to pay $4.3 billion, in Dieselgate pact (updated)

January 11, 2017

Volkswagen has now reached final agreement on a deal with the U.S. government that brings the long, complicated Dieselgate investigation closer to the finish line. One major focus of that deal has been the fines that Volkswagen would pay for deceiving consumers and regulators about roughly 555,000 2.0-liter and 3.0-liter Audi, Porsche, and VW models that were equipped with defeat devices to help the vehicles cheat on emissions tests.

Previously, the fines had been estimated at $3 billion. However, Volkswagen has now confirmed that the sum will be significantly higher, and the automaker will also be subject to special oversight for several years. Here are the major provisions of the final settlement:

1. Volkswagen will pay criminal and civil fines totaling $4.3 billion.

2. Volkswagen is to be overseen by an independent monitor for the next three years to ensure compliance with U.S. regulations.

3. Volkswagen will plead guilty to three felony charges, admitting that it broke U.S. law, and sign a statement of facts, explaining the basis for the fines.

UPDATE: VW Group released a statement on the evening of January 10 saying such an agreement was substantially completed. A further announcement that it had been agreed to by all parties was released midday on January 11. We have revised this article accordingly.

Of those, the $4.3 billion payout may get the most attention, but keep your eye on item #3.

Setting the stage for more losses

In this day and age, it's far more common for companies to pay fines without admitting guilt. For Volkswagen to do both suggests that its infractions were completely indefensible

It also suggests that Volkswagen is especially eager to bring this investigation to a close before a new administration takes over. That doesn't necessarily mean that the company fears it would fare worse under Trump appointees. It's more likely that the automaker simply wants to put Dieselgate behind itself as quickly as possible so it can begin the long, arduous process of rebuilding its brand in America. Having to bring new regulators and appointees up to speed on the matter would, at best, slow things down.

However, Volkswagen's admission of guilt could come back to bite it in die arsch. Volkswagen is currently being sued by U.S. shareholders; by Audi, Porsche, and VW owners; and by 42 states, plus the District of Columbia, and Puerto Rico. When Volkswagen formally admits that it broke the law, it will have fewer ways to defend itself in those cases, and both judges and juries may be look upon it less favorably.

Money down the diesel drain

That said, the fines Volkswagen has agreed to pay aren't exactly chump change. In fact, they'll end up costing Volkswagen more than it had anticipated, per a line in the company's statement: "In case of a settlement agreement, the payment obligations are expected to lead to a financial expense that exceeds the current provisions."

Those provisions have shifted a bit since news of Dieselgate first broke in September 2015. However, the actual and proposed major payouts so far include:

  • $15.4 billion to repair/buy back 2.0-liter Audi and VW diesels, remediate environmental damage, and invest in zero-emissions technology
  • $1 billion (proposed) to do the same for 3.0-liter Audi, Porsche, and VW diesels
  • $1.2 billion to compensate U.S. dealers for lost sales

Add $4.3 billion to that $17.6 billion, and you arrive at $21.9 billion, exclusive of the lawsuits mentioned above. 

Today's settlement includes agreement with the U.S. Department of Justice and with U.S. Customs and Border protection (since many of the illegally outfitted vehicles were imported). The $4.3 billion will be divided among the various agencies.

For more on this story, check out our colleagues at Motor Authority.

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