Volkswagen reaches agreement with US and California on 3.0L diesels; $225M to environmental remediation, $25M to CA ZEV
Volkswagen AG and Volkswagen Group of America, Inc. reached an agreement with the US Department of Justice (DOJ) on behalf of the Environmental Protection Agency (EPA) and the State of California, by and through the California Air Resources Board (CARB) and the California Attorney General, to resolve civil claims regarding approximately 83,000 affected 3.0L TDI V6 diesel engine vehicles in the United States (almost 15,000 of them in California).
The agreement, in the form of a proposed Consent Decree (national version, California version), is subject to the approval of Judge Charles R. Breyer of the United States District Court for the Northern District of California, who presides over federal Multidistrict Litigation (MDL) proceedings related to the diesel matter in the United States. The proposed agreement would allow Volkswagen to recall more than 75% of affected 3.0L TDI V6 vehicles (approximately 63,000) to bring them into compliance with the emissions standards to which they were certified, if appropriate modifications are approved by EPA and CARB.
As disclosed by the Court, Volkswagen has also reached agreement with the Court-appointed Plaintiffs’ Steering Committee (PSC) on substantial aspects of the monetary relief that eligible owners and lessees would receive, and the parties are working to resolve the remaining issues. Details of these discussions remain subject to a confidentiality order of the Court. The Court has scheduled a status conference on 22 December for the parties to report on progress towards a resolution and set a deadline of 31 January 2017 for the parties to submit a formal agreement to the Court.
Under the terms of the proposed Consent Decree, Volkswagen has agreed to:
Recall approximately 63,000 affected 2013-2016 Model Year Volkswagen, Audi and Porsche 3.0L TDI V6 vehicles with Generation 2 engines to bring them into compliance with the emissions standards to which they were certified, if appropriate modifications are approved by EPA and CARB. If Volkswagen is unable to meet this requirement, it will offer to buy back or terminate the leases of these vehicles and may also seek approval by EPA and CARB to offer customers a modification to substantially reduce their NOx emissions.
Buy back or terminate the leases of approximately 20,000 affected 2009-2012 Model Year Volkswagen and Audi 3.0L TDI V6 vehicles with Generation 1 engines or, if approved by EPA and CARB, modify the vehicles to substantially reduce their NOx emissions so as to allow eligible owners and lessees to keep them.
Contribute $225 million to the environmental remediation trust that is being established under Volkswagen’s 2.0L TDI settlements in the United States to fully mitigate the lifetime NOx emissions of the affected 3.0L TDI V6 vehicles.
As part of its agreement with the State of California, Volkswagen will also pay $25 million to CARB to support the use of zero emissions vehicles (ZEVs) in the State.
According to the civil complaint against Volkswagen filed by the Justice Department on behalf of EPA on 4 January 2016, and amended on 7 October 2016, Volkswagen allegedly equipped its 3.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on required emissions controls only during that testing process. During normal driving conditions, the software renders these emissions control systems inoperative or reduces their effectiveness, resulting in increased emissions. This is known as a defeat device (an undisclosed Auxiliary Emissions Control Device, AECD).
By using a defeat device, these cars meet emissions standards in the laboratory, but emit up to nine times or more above the EPA-compliant levels for NOxNOx during normal on-road driving conditions. The Clean Air Act requires manufacturers to certify to EPA that vehicles will meet federal emissions standards. Vehicles with defeat devices cannot be certified.
Because Volkswagen cannot modify the affected 2009 through 2012 Volkswagen Touareg and Audi Q7 generation 1 diesel vehicles to meet EPA-certified exhaust emissions standards, the settlement requires Volkswagen to offer owners of generation 1 vehicles the option to have the company buy back the car and to offer lessees a lease cancellation at no cost. If a plan is proposed by Volkswagen and approved by EPA and CARB to substantially reduce emissions from the generation 1 vehicles, Volkswagen will also have to offer that as an option for consumers.
For the generation 2 vehicles, Volkswagen will recall and fix these vehicles so they meet their certified exhaust emissions standards, after the technical solution is approved by regulators. If after extensive testing the solution does not perform as expected and is not approved, Volkswagen must offer to buy back the vehicles. In that case, the company can also seek approval of an emissions modification plan to substantially reduce emissions and, if approved, can offer that as an additional option for generation 2 vehicles.
Under the terms of the settlement, Volkswagen must achieve an overall recall rate of at least 85% for each of the generation 1 and generation 2 vehicles recall programs or pay additional sums into the mitigation trust fund. The buyback and lease termination program for generation 1 vehicles will begin within 30 days following court approval of the settlement. Vehicle modifications will become available to eligible owners and lessees once the modifications are approved by regulators.
The terms of the proposed agreement will be effective and final only after approval by the Court. At the earliest, approval will occur during spring of 2017. Affected 3.0L TDI V6 customers do not need to take any action at this time, and can visit www.VWCourtSettlement.com for more information.
The Multi-District Litigation (MDL). The case is known as In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices and Products Liability Litigation, MDL 15-2672, in United States District Court for the Northern District of California in San Francisco before Judge Charles R. Breyer.
The proposed Consent Decree was executed by Volkswagen AG, Volkswagen Group of America, Inc., Volkswagen Group of America Chattanooga Operations, LLC, Audi AG, Dr. Ing. h.c. F. Porsche AG and Porsche Cars North America, Inc. It includes the following 3.0L TDI V6 engine vehicles:
On 25 October, Volkswagen obtained final Court approval for a 2.0L TDI Settlement Program to resolve civil claims related to approximately 475,000 eligible Volkswagen and Audi 2.0L TDI vehicles in the United States. As part of that settlement program, Volkswagen will also pay $2.7 billion over three years into an environmental trust to remediate the total, lifetime excess NOx emissions from 2.0L TDI vehicles in the United States and invest $2.0 billion over 10 years in zero emissions vehicle (ZEV) infrastructure, access and awareness initiatives. (Earlier post.)