On Thursday, German automaker Volkswagen has finally reached a settlement to repair or buy back nearly half a million diesel cars involved in the dieselgate scandal. The deal also covers setting up consumer and environmental and compensation funds that conform with the U.S. Environmental Protection Agency.
According to U.S. District Judge Charles Breyer, the deal covers substantial compensation for car owners whose vehicles were fitted with fraud emission software. The owners were also given the alternative to sell their vehicles back to VW, or have it fix. The deal gives the VW's engineers a break from the pressure, who were unable to come up with a resolution acceptable to the EPA, USA Today reported. The agreement comes after the second largest automaker in the world was hit by dozens of lawsuits from car owners and various agencies around the world after the dieselgate scandal erupted.
"It looks like they're moving forward in good faith and will be compensating consumers," said Carl Tobias, a product liability law professor at the University of Richmond. "If it's substantial compensation, that probably helps on the PR front."
The details about the actual penalties and the compensation that owners will receive are still under negotiation. Judge Breyer has set the deadline on June 21 for VW to answer all the financial aspect of the deal. New York Times claims that Kelley Blue Book, a research company has assessed that VW will be spending more than $7 billion for the buy back offer. However, the firm also warned that VW will be spending more billions because the company is also facing litigations in Europe and other parts of the world.
"If they agree to buy back the cars, the costs will be higher than the current provisions," said Matthias Hellstern, managing director for corporate finance at Moody's Investors Service in Frankfurt.
As part of the negotiation, the German automaker is also asked to set an environmental remediation fund and allocate funds to "promote green automotive." The move, according to the judge was meant to cover up years of destructing the environment with nitrogen oxide emissions at dangerous levels. If VW was unable to propose an agreement before the court-appointed deadline, the company is set to face a hearing with the U.S. Federal Court over the emission violations.
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