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Judge Okays $1.2 Billion Dieselgate Dealer Settlement Package

The Volkswagen emissions scandal continues to lurch to a conclusion as the judge in the case approves the dealer settlement.
Posted: January 24, 2017 - 10:38PM
Author: Marc Stern

Slowly, but surely, the American piece of the Volkswagen Dieselgate scandal is grinding its agonizing way to completion. On Monday, U.S. District Court Judge Charles Breyer gave final approval to the automaker’s settlement with its dealer network.

Volkswagen’s 650 dealers and the automaker reached an agreement shortly after the automaker settled a class-action suit covering 475,000 2.0-liter four-cylinder turbodiesel engines that had emissions-cheating software installed. That settlement came in June, and the dealer agreement was about a month later. The deal with the dealers is worth $1.2 billion in cash and about another $480 million in payments and incentives. Dealers will receive their payments, averaging $1.85 million each, over 18 months.

Judge Breyer called the settlement “fair, reasonable and adequate” in his San Francisco courtroom.

“The Volkswagen-branded franchise dealer class-action settlement finalized today [Monday] represents an outstanding result for Volkswagen’s affected franchise dealers who, like consumers, were blindsided by the brazen fraud that VW perpetrated,” Steve Berman, managing partner of Hagens Berman, lead attorneys for the dealers, said.

Hinrich Woebcken, chief executive of VW North America, has called the agreement “a very important step in our commitment to making things right for all our stakeholders in the United States.”

Under the settlement, VW dealers will receive volume-based incentive payments from Volkswagen. And, the automaker will let capital improvements slide for two years.

Up to this point, Volkswagen has agreed to spend about $22 billion to address U.S. claims. The claims are from owners, environmental regulators, states and dealers. The claims stem from the excess emissions that VW’s diesel cheating program fostered.

Though the automaker’s diesel fraud began in 2006, VW admitted to it about 16 months ago. At that time – September 2015 – VW acknowledged that it had installed fraudware that allowed its turbodiesel engines to look as if they were passing emissions tests. Of course, as has been shown, the reality was far different. The vehicles were shown to emit up to 40 times the legally allowed levels of nitrous oxide (NOx), an essential smog-producer and a significant portion of a turbodiesel’s emissions profile. Dealers say the scandal that resulted not only tarnished the brand but also cost them sales.