The Cable

The Cable goes inside the foreign policy machine, from Foggy Bottom to Turtle Bay, the White House to Embassy Row.

Volkswagen’s $14.7 Billion Settlement With the U.S. Is Just the Beginning of Its Legal Woes

The company could end up paying $61 billion to settle emissions cheat.

GettyImages-542132168

Volkswagen, the iconic German carmaker, has agreed to pay $14.7 billion to settle charges that it cheated on U.S. diesel emissions tests. But the company’s legal fight is far from over.

The deal announced by the Justice Department Tuesday contains the largest-ever car buyback program in U.S. history. Volkswagen has agreed to pay more than $10 billion to buy back cars or make fixes to the nearly 500,000 diesel-powered vehicles that used the cheat, meant to beat U.S. emissions standards.

Volkswagen, the iconic German carmaker, has agreed to pay $14.7 billion to settle charges that it cheated on U.S. diesel emissions tests. But the company’s legal fight is far from over.

The deal announced by the Justice Department Tuesday contains the largest-ever car buyback program in U.S. history. Volkswagen has agreed to pay more than $10 billion to buy back cars or make fixes to the nearly 500,000 diesel-powered vehicles that used the cheat, meant to beat U.S. emissions standards.

In addition, VW has agreed to pony up $2 billion to pay for programs directed by California and the U.S. Environmental Protection Agency meant to promote the use of electric cars, ride sharing, and other means of cutting down on auto emissions. It will also pay $2.7 billion for an environmental remediation fund.

“We’re getting VW’s polluting vehicles off the road and we’re reducing harmful pollution in our air, pollution that you never should have been emitted in the first place,” EPA Administrator Gina McCarthy said at a press conference Tuesday. She called it a “groundbreaking settlement.”

Last year, Volkswagen admitted to adding software in VW and Audi cars with 2-liter engines dating back to 2009 that allowed them to cheat U.S. emissions standards. Deputy Attorney General Sally Yates said the action was “one of the most flagrant violations of environmental and consumer laws in our country’s history.”

The company is not out of the woods yet. Yates said the company could face additional penalties down the line. She added that a criminal investigation into the remains “active and ongoing.”

Separately, Volkswagen agreed to pay at least $600 million to settle a case brought by 44 U.S. states, the District of Columbia and Puerto Rico.

Tuesday’s agreement is hardly an end to the company’s legal woes. It still faces a class action suit from 278 institutional investors in the company, who suffered massive losses when the emissions cheat became public. Volkswagen’s stock price has plummeted as much as 40 percent since the news of the scandal broke.

It also faces separate inquiries in Europe. “Consumers have been massively misled by Volkswagen and this settlement in the U.S. recognizes the damage suffered by car drivers. It is inconceivable that consumers in the EU get treated differently,” Monique Goyens, director general of the European Consumer Organisation, said in a statement.

Richard Hilgert, an analyst at Morningstar Equity Research, estimates the total cost to the automaker will exceed $61 billion.

Photo credit: JOHN MACDOUGALL/Getty Images

More from Foreign Policy

coronavirus-vaccine-predictions-2021-foreign-policy-global-thinkers-brian-stauffer-illustration

The World After the Coronavirus

We asked 12 leading thinkers to predict what happens in 2021 and beyond.

Protesters prepare to burn an effigy of Chinese President Xi Jinping during an anti-China protest in Siliguri, India, on June 17, 2020.

Why Attempts to Build a New Anti-China Alliance Will Fail

The big strategic game in Asia isn’t military but economic.

china-bhutan-settlement-village-security-outpost-border-dispute

China Is Building Entire Villages in Another Country’s Territory

Since 2015, a previously unnoticed network of roads, buildings, and military outposts has been constructed deep in a sacred valley in Bhutan.