Atlanta real estate agent Leslie Erickson spends a lot of time in her car, showing off houses and going to closings.
Erickson liked her old gasoline-powered Volkswagen Passat for its size, but needed a car with better mileage. Early last year she thought she’d found the answer: a new diesel Passat with ample room and great mileage that she was told was far friendlier to the environment than the smoke-belching diesels of old.
On Tuesday, federal and state regulators announced blockbuster settlements totaling about $15.3 billion in which VW has agreed to buy back certain vehicles, terminate leases or fix models that were programmed to cheat emissions tests. Erickson is one of more than 17,000 Georgians who will have to decide what to do about their vehicles — whether to give them up or get them fixed.
The deal covers about 500,000 vehicles in the U.S. made between 2009 and 2015 with 2.0-liter diesel engines. The models include Volkswagen turbo-diesel or TDI Jettas, Passats, Golfs and Beetles as well as diesel-powered Audi A3 models.
The cars were equipped with “defeat devices” intended to cheat emissions tests, the government said. Volkswagen marketed the vehicles as “clean” diesels when they were anything but, and sold them at a premium.
Erickson said she’s hopeful VW can come up with an emissions fix to her leased 2015 Passat that will retain both the performance and fuel economy she enjoys.
“I love my car, I absolutely love it. I love the way it drives,” she said.
In the settlements announced Tuesday — one led by the U.S. government and the state of California, and another with the U.S. Federal Trade Commission — VW agreed to spend more than $10 billion to compensate consumers and another $4.7 billion to mitigate pollution from dirty vehicles and to develop new zero emissions models. It also will pay a total of $570 million in penalties to more than 40 states.
“By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our environment,” Deputy Attorney General Sally Q. Yates said in a news release.
The scandal, which erupted about nine months ago, cost the company’s former CEO his job and severely dented VW’s polished image for sharp engineering and environmental bona fides. The scandal has led to billions in losses for the company.
And the fallout isn’t over.
The settlement does not involve some 85,000 U.S. vehicles with 3.0-liter diesel engines, mostly Audis and Porsches. It also doesn’t include vehicles in other nations. Other civil litigation and a federal criminal investigation remain ongoing.
The settlement is nearly 10 times the size of ones reached with GM and Toyota in recent years over safety issues, said Karl Brauer, a senior analyst at Kelley Blue Book.
“While undoubtedly a painful pill for VW’s accountants and stockholders to swallow, it’s also the most comprehensive and customer-friendly resolution I’ve ever seen,” he said. “Not only will VW diesel owners have multiple compensation options but the company will also fund environmental efforts and advanced clean air technology to offset its excessive diesel emissions.”
Georgia could receive more than $58 million in environmental mitigation funds, Attorney General Sam Olens’ office said in a news release. VW is also paying more than $1,000 per vehicle to states for restitution, which will total more than $18.8 million for cars sold and leased in Georgia, Olens said.
“Volkswagen’s deliberate circumvention of federal emission standards deceived consumers,” Olens said. “This settlement brings justice to affected Georgia consumers.”
The settlements have yet to be approved by a federal judge. The government said consumer payments may begin as early as October.
U.S. regulators said VW must offer to buy back affected vehicles purchased before the scandal broke in September. The company would pay the full retail value as of that date. The government said owners who opt to sell their cars back to the manufacturer will receive between $12,500 and $44,000 depending on the value of the car, mileage and other factors.
Owners and lessees who return their cars also are eligible for additional compensation for costs associated with finding a new vehicle and for the cost of being harmed by “Volkswagen’s fraudulent marketing and treatment of customers,” a government document said.
Those that instead opt to get their cars fixed for free could receive $5,100 to $10,000 in compensation.
The FTC order also will have VW offer affected consumers the option of having car loans forgiven if they owe more than the vehicles are worth.
Some metro Atlanta VW dealers said they had little information beyond what was released by the government. Other dealers said they were directing customers to a new website, VWCourtSettlement.com.
“We are working very closely with VW on next steps and following their direction on how they will proceed,” said David Hult, chief operating officer at Asbury Automotive Group, which operates one VW dealership in metro Atlanta
VW has yet to come forward with regulator-approved plans to bring the affected automobiles into environmental compliance. It’s also unclear if modified VWs will retain the mileage and performance customers have come to expect.
Michelle Krebs, a senior analyst at Autotrader, said consumers have time to weigh their options. The fix will take patience, she said, because “it’s not yet proposed, it’s not been approved and it will take time.”
Autotrader, like Kelley Blue Book, is owned by Cox Enterprises, which also operates The Atlanta Journal-Constitution.
For now, Erickson is expecting to hedge her options. She said she hopes that her car can be fixed and she can test it out during the remainder of her lease. Then she can decide at the end of the term whether to buy the car as she always planned or let it go.
Blockbuster VW settlements
On Tuesday, Volkswagen agreed to landmark settlements totaling about $15.3 billion over an emissions cheating scandal involving 2.0-liter models billed as “clean” diesels. VW agreed to spend more than $10 billion to compensate consumers and another $4.7 billion that would be used to mitigate pollution from affected models and to develop new zero emissions vehicles and related infrastructure.
Affected models:
Volkswagen Beetle and Beetle convertible: 2013-2015
Volkswagen Golf 2-door: 2010-2013
Volkswagen Golf 4-door: 2010-2015
Volkswagen Golf SportWagen: 2015
Volkswagen Jetta and Jetta SportWagen: 2009-2015
Volkswagen Passat: 2012-2015
Audi A3: 2010-2013 and 2015
What should you do?
“My advice to consumers is take a deep breath, read over the various options and decide what’s best,” Michelle Krebs, senior analyst at Autotrader said. The fix will take patience, she said, because “it’s not yet proposed, it’s not been approved and it will take time.”
VW must still announce its plans to bring vehicles back to environmental compliance and those plans must be approved by regulators.
Karl Brauer, a senior analyst at Kelley Blue Book, said VW diesel owners are among the automaker’s most loyal customers, and he said he expects many owners will opt to repair their vehicles. He said VW will likely work hard to try to convince owners to stay with the company’s products — whether that’s fixing their existing cars or selling consumers a new model.
For more information:
Two websites have been established for more information about the settlements:
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