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Anxious Owners Face Short Delay In OK of Dieselgate Class-Action Suit Settlement

A U.S. District Court judge has delayed final approval of the $10.03 billion final settlement of the Dieselgate scandal. The one-week delay is to consider new issues raised in court Wednesday.
Posted: October 18, 2016 - 11:35PM
Author: Marc Stern

Anxious Volkswagen diesel owners who were expecting a final decision in the Dieselgate class-action suit settlement will have to wait a bit longer as Judge Charles Breyer indicated that he needs a little more time to look at some new issues raised.

Fortunately, the nearly half-a-million owners won’t have to wait long as the judge indicated in court Wednesday that he needed only another week – Oct. 25 – to consider the new issues in the case. He did tell the court, said Automotive News, he is “strongly inclined” to give final approval to the settlement.

VW Owners Challenge Payouts

During the hearing, some VW owners challenged the basis for the repurchase price. They argued that they should be reimbursed for the purchase price of their vehicles, rather than using the National Association of Auto Dealers (NADA) “clean” trade value as of September 2015, when VW admitted it had planted cheatware on 475,000 vehicles. NADA publishes a series of vehicle value guides recognized as industry standards.

Another argument advanced was that the settlement doesn’t cover the costs of dealer-installed options, finance and insurance products and registration fees. Fewer than 4,750 owners objected to the deal. As of last Friday, 336,612 owners have opted for the buyback benefits. About 3,200 owners have opted out of the buyback.

Judge Breyer’s delay puts a slight crimp in the planning of the 475,000 diesel owners who are eligible to have their vehicles repurchased by the automaker as part of the $10.03 billion class-action suit settlement. When it comes, Judge Breyer’s final approval will set up a clear path for the automaker to repurchase vehicles caught in the net of the self-inflicted VW emissions scandal. The settlement is, if not the biggest, one of the largest class-action suit settlements in history.

Those owners opting for the Dieselgate class-action suit settlement should receive between $5,100 and $10,000 in compensation. The compensation is in addition to the value of their vehicle as of Sept. 18, 2015, when the scandal became public.

Owners have two years to decide whether to accept the buyback or receive a repair of the doctored emissions system. The Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) have so far rejected VW repair plans, and the parties are working on the fix. Right now, there is no acceptable fix for the U.S., and there is no indication when one might be available. In Europe, however, a fix has been approved by regulators, and the automaker has repaired about 3 million of the 8.5 million vehicles involved.

Fix Could Limit Payout

If enough owners were to opt for a fix, VW, of course, would pay less than the amount earmarked for the class-action suit settlement.

The settlement represents a significant milestone for owners and the automaker. When the buyback begins, owners will be assured the vehicles that are sitting in their driveways will have value. At the moment, the VW turbodiesels affected by Dieselgate have had their value cut to almost nil. When the plan goes into effect, owners will get a minimum repurchase payment plus compensation due to lost value.

For Volkswagen, final plan approval means it will be moving on from the low point of the emissions scandal that the automaker initiated when it admitted to cheating on diesel emissions tests.
Judge Breyer held a three-hour hearing in a crowded courtroom in San Francisco’s Federal District Court. At the hearing, he did grant preliminary approval of a piece of the settlement. The jurist approved the $1.2 billion settlement with 650 U.S. VW dealers.

Volkswagen, in a statement, said that it welcomed “Judge Breyer’s positive comments during today’s hearing.” The automaker indicated that it believed the settlement will provide “fair and reasonable resolution for affected Volkswagen and Audi customers in the United States.” The automaker also thanked its customers for their “continued patience as the approval process moves forward.”

Drawn Out Settlement Saga

With final approval delayed a week, turbodiesel owners are facing another hold in the drawn-out Dieselgate class-action suit settlement. The agreement compensates owners for Volkswagen’s installation of a “defeat switch” in their emissions control systems of their 2.0-liter turbodiesel engines.

VW engineers knew as early as 2006 that their engines would not be able to meet the toughened emissions rules for oxides of nitrogen (NOx), a key emissions component of diesel exhaust. The automaker sold these vehicles from 2009-2015 keeping the knowledge of their scam to themselves. It was one of the best-kept secrets in the industry.

It was a secret until a group of independent researchers, who were looking into VW’s supposed success with “clean diesel” power, found that the automaker’s engines were certainly not clean. On further investigation, they found evidence of a cheat switch that allowed the automaker to selectively turn on emissions control features that would clean up emissions when a test was run.

When the test ended, the switch software resets the turbodiesel emissions software so that it maintained top performance and mileage. On reset, NOx emissions tanked, allowing vehicles to emit up to 40 times the allowable limits of NOx. EPA notified VW that it was in violation in September 2015 and the automaker admitted it on Sept. 18, 2015.