Owners of Volkswagen, Audi, and Porsche vehicles with the Audi-designed and -built 3.0-liter turbo-diesel (TDI) V-6 probably paid a lot more for their vehicles than those who bought cars with the 2.0-liter four-cylinder TDI engine. But that didn’t earn them a place at the front of the line for a resolution to their portion of the VW/Audi emissions scandal. Now, finally, a settlement has been announced.
While technical solutions still aren’t set, and it could be the middle of 2017 before the remedy process begins, a partial settlement has been reached in the U.S. District Court for the Northern District of California, between the Environmental Protection Agency (EPA), the State of California and its Air Resources Board (CARB), and those Volkswagen Group brands. Under the terms of the settlement, the Volkswagen Group brands will recall nearly 83,000 vehicles powered by the V-6 TDI engine, spanning the 2009 through 2016 model years.
“The settlement marks another significant step in holding Volkswagen accountable for cheating Americans out of the promise of cleaner air by selling vehicles equipped with defeat devices,” said Assistant Attorney General John C. Cruden. Meanwhile, Volkswagen Group of America president and CEO Hinrich Woebcken said: “The agreement announced by the Court today between Volkswagen and U.S. environmental regulators is another important step forward in our efforts to make things right for our customers, and we support the efforts of the Court to bring about a fair and reasonable resolution of remaining 3.0L TDI V-6 claims as quickly as possible.”
Buying back vehicles, fixing them, and making good with regulators and consumers could cost VW another approximately $1 billion—on top of the $14.7 billion cost of the similar effort surrounding vehicles with the four-cylinder TDI engine.
The issue involves Volkswagen’s use of a defeat device intended to identify an emissions test and run the engine for lower emissions only then. Vehicles with the 3.0-liter TDI already have exhaust aftertreatment systems that spray a urea solution into the hot exhaust stream specifically to reduce nitrogen oxides (NOx)—the offending emissions component. Early on in the diesel scandal, it was widely anticipated that they would be more easily remedied to regulators’ satisfaction—in part because these models weren’t as far out of compliance as the 2.0 TDI models. However, back in July CARB harshly rejected proposed fixes, calling them “incomplete” and “substantially deficient.”
Two Generations, One Can Be Fixed
There are two versions of the engine, termed Generation 1 and Generation 2, and the solutions for the affected vehicles and the options available to owners will differ depending on the vehicle and model year. Vehicles with the Generation 1 of the 3.0-liter TDI include the 2009–2012 Audi Q7 and Volkswagen Touareg. Those with Generation 2 (when these models received a power bump, to 240 horsepower) are the 2013–2015 Audi Q7, 2013–2016 Volkswagen Touareg, 2013–2016 Porsche Cayenne, and 2014–2016 Audi A6, A7, A8, A8L, and Q5.
Under the settlement, 85 percent of the vehicles (calculated separately for each engine) need to be recalled for the prescribed remedy. Generation 1 will be subject to a buyback program similar to what was offered with the 2.0-liter cars, because they can’t be brought within EPA emissions compliance with a reasonable fix. But for those Generation 1 owners who don’t want the buyback, a fix will be offered that will get those vehicles closer to compliance. Generation 2 vehicles are effectively under recall; after the exact fix is approved by the EPA and CARB, Volkswagen will repair those models.
In all, there are 19,602 vehicles (VW says 20,000) with the Generation 1 engine—and it’s likely that the vast majority of those will be bought back. The documents mention a Generation 2 population of 62,772, including 11,805 in California.
Some Great Buyback Prices on Dirty Diesels
Buyback prices for the eligible vehicles with the V-6 TDI will be set using NADA Used Car Guide Clean Retail values as of November 2015. Since some 2016 models were sold, those are a preset percentage (12.9 percent) above the prices for equivalent 2015 models. That price will be adjusted for options, mileage, and the region the vehicle was registered in as of November 2015; and it even includes reimbursement for state and local taxes.
Under the projected timeline, owners won’t have a lot of incentive to hurry; they have until March 31, 2019, to make a claim for buyback or lease termination, and they’re reimbursed the same amount if they do so early next year or just before the offer ends. The settlement lays out a new schedule for emissions modifications from VW, with final submissions due next spring and summer for Generation 2 engines and in November 2017 for Generation 1. Fixes will depend on how many miles the vehicle has accumulated.
Volkswagen will also be required to pay an additional $225 million toward projects that reduce NOx emissions. California will receive $41 million of that, and CARB wrote into the settlement some very specific requirements for the sale of electric vehicles.
It has been a busy week for Volkswagen’s lawyers in North America. VW also just reached a settlement in Canada, where vehicle emissions rules are closely aligned with those of the U.S. The Canadian settlement, which keeps to terms that are comparable to the U.S. settlement finalized in October, will cover about 105,000 vehicles there and potentially cost the automaker the equivalent of U.S. $1.6 billion. As in the United States, Canadian owners will be eligible to sell their vehicle back at an agreed-upon price or opt to fix their vehicle and receive a payment. And under a tentative consumer settlement in Canada, Volkswagen and Audi Canada will pay out the equivalent of U.S. $11.2 million.
Back to the United States, there will also be a consumer-compensation component for V-6 TDI owners. Expect some amounts for that to be set as early as this week. “Today’s partial settlement does not resolve any pending claims for civil penalties, nor does it address any potential criminal liability,” stated the EPA in a release. “The settlement also does not resolve any consumer claims, claims by the Federal Trade Commission, or claims by individual owners or lessees who may have asserted claims in the ongoing multidistrict litigation.”
In other words, the costs for VW will keep racking up, while for owners, the final approval for the settlement, and the fixes themselves, are still months away.
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