The deadline for a formal agreement between Volkswagen and U.S. authorities has been extended by a week as the parties draft a complex deal that will determine the remedies and recall process for some 480,000 diesel vehicles sold in the U.S. The presentation of the agreement to the U.S. District Court was originally scheduled for June 21, though the court has given the parties another week to finalize details.
“U.S. District Court Judge Charles Breyer, who presides over the Multi-District Litigation proceedings in San Francisco, announced that given the highly technical nature of the proposed settlements in these complex proceedings, and at the request of Settlement Master Robert S. Mueller III, the Court has given the parties an additional week until 12 p.m. PST on June 28, 2016 to submit the associated documents to the Court,” Volkswagen said in a statement. “We thank our customers for their continued patience as the process of finalizing agreements moves forward.”
The agreement is expected to outline a recall process, in addition to giving owners the option of selling their cars back to Volkswagen. A deal in principle was reached in late April, though the specifics of the agreement have been under discussion between Volkswagen and other parties to the federal suit over the past several weeks.
Volkswagen is expected to make a detailed statement to the press after the agreement is entered into by the parties, which will outline the recall/buyback and compensation process for owners of the affected vehicles. The automaker has not made any preliminary statements detailing the agreement or the negotiations, as is usual in such cases.
Some of the larger unknowns of the upcoming agreement are the amount of monetary compensation for owners who decide to sell their cars back to VW, what will be done with cars that are sold back to the automaker and the amount of compensation to owners who elect to have their cars repaired. While the agreement is expected to offer the buyback option for all 480,000 vehicles, it is not known at this time what the EPA and the California Air Resources Board will allow the automaker to do with cars that are sold back instead of being repaired; will VW be allowed to repair them and sell them as used vehicles?
Another major variable concerns the 3.0-liter diesel models, which will not be part of this agreement. The deal that the automaker will enter into is not expected to detail a recall or compensation process for Audi, Porsche and VW models equipped with the larger TDI engine — a more straightforward recall with a software update is expected for these vehicles.
Finally, the biggest variable in purely monetary terms is the amount of the fines that VW is expected to pay to the various government entities. The automaker has committed a total of $18.2 billion to its worldwide diesel recall efforts, but it is still not known what the U.S. government will ask of the automaker. A year ago VW expected the fallout from the defeat device controversy to cost the automaker approximately $100 million in fines and recall procedures — this number is expected to be surpassed as part of the agreement with the Department of Justice, the EPA and the California Air Resources Board.
The amount of the fine is expected to reset the precedent for penalties paid by automakers, and in many ways it will define future crises of this type in terms of the monetary penalty, court-ratified remediation efforts and deterrent effect. Will the U.S. government make an example of Volkswagen, or will it agree to limit the financial toll for its actions?