The final cost to Volkswagen of its emissions cheating scandal could be as high as A$60 billion after a US court ruling in early February and changes to British consumer laws.
Court documents filed in the US reveal that Volkswagen will pay US$1.2 billion (A$1.6 billion) in settlements to about 80,000 owners of its 3-litre diesel-powered vehicles. It will buy some back from customers and fix others.
Meanwhile affected customers in the UK could be refunded for the full the cost of their car while also keeping their vehicle.
According to the firm making the claim, Car Emissions Lawyers, purchasers of VW diesel vehicles from October 2014 onwards could be entitled to compensation worth between 25 and 100 per cent of the original cost of their car.
About 1.2 million British vehicles, including Audis, Skodas and SEATs, were affected. The higher level of compensation is the result of an amendment to the Consumer Protection from Unfair Trading Regulations 2008.
With an average cost per vehicle of about £17,500 (A$29,000), a full payout could cost the company A$35 billion.
The US$1.2 billion settlement amount could rise to US$4 billion (A$5.2 billion) if regulators don’t approve the planned rectifications. The deal covers newer Volkswagen-brand Audi and Porsche cars and sport-utility vehicles, which are usually more expensive than the 2-litre vehicles at the core of the emissions scandal.
Volkswagen last year agreed to pay US$17.5 billion (A$22.9 billion) to settle civil lawsuits, including US$10 billion (A$13.1 billion) to compensate 475,000 drivers of 2-litre diesel vehicles with engines that contravened US emissions laws. In January, Volkswagen pleaded guilty to conspiring to defraud the US government and consumers by manipulating diesel engines. It agreed to pay a criminal fine of US$4.3 billion (A$5.6 billion).
VW has now agreed to spend a total of up to US$22 billion (A$29 billion) in the US to owners, environmental regulators, states and dealers.
Two categories of settlement
The settlement splits the 3.0L diesel vehicles into ‘Generation 1’ cars (model years 2009 to 2012) and ‘Generation 2’ vehicles (model years 2013 to 2016).
Cars affected include the VW Touareg, Audi Q7, A6, A7, A8, A8L, Q5 and Porsche Cayenne diesels.
Owners of Generation 1 cars will be eligible for a buyback from VW Group, as their vehicles cannot be repaired to meet their officially certified emissions standards. It is likely that Generation 2 vehicles will be able to be fully repaired, saving VW the cost of a buyback if the company can get a solution approved by the California Air Resources Board and the Environmental Protection Agency.
In a separate case German parts supplier, Robert Bosch GmbH, agreed to pay US$327.5 million (A$428.6 million) to settle a US civil claim that it helped create ‘defeat device’ software that allowed Volkswagen cars to beat US pollution testing.
VW has approval to recall 61,000 vehicles in Australia; however they will be amongst the last in the world to be addressed. The recall affects around 11 million vehicles worldwide.
Software repairs on 35,000 of the Australian vehicles were able to be undertaken last year, with the remainder expected to be performed in 2017.
Volkswagen Australia continues to face two actions in the Federal Court, including a class action being jointly handled by Maurice Blackburn Lawyers and Bannister Law.
Volkswagen has argued that Australian customers are not entitled to compensation, claiming there will be no adverse effect on its vehicles once the upgrades are made.