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Volkswagen to pay $14.7 billion to settle emissions-cheating cases

After violating environmental and consumer laws for years, Volkswagen makes the largest-ever automotive buyback offer in the US

 
By DTE Staff
Last Updated: Wednesday 29 June 2016
The scandal has also exposed gaps in emissions regulations across the world Credit: Thinkstock
The scandal has also exposed gaps in emissions regulations across the world Credit: Thinkstock The scandal has also exposed gaps in emissions regulations across the world Credit: Thinkstock

On June 28, German automaker Volkswagen agreed to pay up to $14.7 billion to settle emissions-cheating claims with US consumers and regulators. This announcement came on the heels of the company’s admission to the fact that it had tried to circumvent tighter emissions standards for years to stay in the market. Volkswagen has also agreed to buy back vehicles from consumers and provide funding that could benefit makers of cleaner technologies.

This largest-ever automotive buyback offer in the US came in a deal announced by the Justice Department, Federal Trade Commission, Environmental Protection Agency and California state regulators. The company will now have to set aside $10 billion to cover buybacks or fixes for diesel cars and sport utility vehicles.

In September 2015, Volkswagen had admitted to installing secret software that allowed the US vehicles to emit up to 40 times the permissible limit. The decision to pay $14.7 billion won’t end the auto giant’s woes as it may still face criminal charges.

How did Volkswagen mange to trick official emissions tests?

In September 2015, Delhi-based Centre for Science and Environment extensively reported on how Volkswagen defeated the US emissions tests. It revealed how popular diesel car models of Volkswagen were found to be patched with defeat devices wired to hoodwink emissions tests under the Clean Air Act in the US. According to the report, “Volkswagen sold more than 11 million cars across the US and Europe between 2009 and 2015 that emit several times more nitrogen oxide (NOx) than the certified levels”.

Volkswagen Emission Scandal: Key Developments in 2016

January 4: The US Justice Department sued Volkswagen over emissions-cheating software found in nearly 600,000 vehicles sold in the US.

March 10: Volkswagen's US chief Michael Horn decided to step down.

March 29: The US Federal Trade Commission sued Volkswagen, alleging that the company made false claims in its commercials that promoted "Clean Diesel" vehicles as environmentally friendly.

April 21: US District Court Judge Charles Breyer allowed owners of Volkswagen cars to sell them back to the company or have them fixed.

April 22: Volkswagen took an $18.2-billion charge to cover the cost of the diesel scandal. It delayed the results of its internal probe until the fourth quarter. The company reported a full-year loss of $1.53 billion.

June 1: US sales of the Volkswagen brand were hit in the first five months of the year. Global sales of Volkswagen cars were down by 2 per cent.

June 28: Volkswagen agrees to $14.7-billion settlement of environmental and consumer claims.

Volkswagen India was also living in denial

On 1 April, Volkswagen India Pvt Ltd had announced that it would recall 3,877 Vento cars with a 1.5-litre diesel engine and manual gearbox. The reason cited was inconsistent carbon monoxide (CO) emissions that were observed to be exceeding the threshold limits. The carmaker also decided to temporarily stop sales of the manual gearbox version of the Vento with a 1.5-litre diesel engine.

However, this development was a result of a surprise emission tests conducted by the Automotive Research Association of India on the Vento at the company’s plant at Chakan in Pune. The fault was discovered during the Conformity of Production tests.

It was not the first time that India had a brush with emission problems in Volkswagen’s cars. In December 2015, Volkswagen recalled 323,000 vehicles in India. It happened after government-ordered probe found that about 323,000 cars in India, running on EA 189 diesel engines (all variants—1.2-litre, 1.5-litre, 1.6-litre and 2.0-litre) had the so-called defeat device—software that can detect when a car is being tested and manipulate performance to improve results.

The scandal has also exposed gaps in emissions regulations across the world. India, too, will have to fix legal compliance framework and come up with a rigorous in-use vehicle testing mechanism, as suggested by CSE in 2015.

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