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Volkswagen Settlement Set to Shatter Records

vw reaches 10 billion dollar settlement in emissions fraudWhen news of the Volkswagen emissions scandal initially broke, the auto giant’s first move was to offer vehicle owners a $500 check for their troubles. The prevailing thought, like most industry shakeups, was that the company would dominate headlines for a few days and then the world would simply move on.

That never happened. And now, when referring to one of the biggest stories in the history of the automotive industry, the word most used to describe it isn’t scandal; it’s fraud.

To recap, researchers discovered in mid-2014 that diesel-powered Volkswagen vehicles were using hardware and car computer software to defeat emissions tests. When the systems detected a possible testing scenario, they brought the cars’ emissions into regulated levels. On the road, however, VWs were polluting at levels nearly 40 times those allowed by environmental regulations. When pressure for answers to these accusations never relented, the company would finally admit to its deception a year later.

It’s worth emphasizing that this was not a software bug. It was not a glitch. This was an intentional action undertaken by one of the world’s largest automobile manufacturers to defeat environmental standards set forth by countries around the world.

The penalty for this action has already been severe. The amount that the company has had to set aside to deal with the fallout from its actions seems to grow every day and currently sits at $18 billion. At the same time, the confidence that once ultra-loyal customers had in the brand continues to fall through the floor.

And now, in a case being presided over in United States federal court, an arrangement has been reached that makes all previous automotive settlements look like pocket change.

$10 billion will be used to settle claims with VW owners that have been affected by the company’s environmental fraud. This does not include the amount that will be required to fix fraudulent emissions systems in cars that remain on the road. Current VW owners will be given the choice between getting their vehicle fixed – once the company develops a way to do so – or selling their vehicles back to the company and dumping the brand altogether. While owners are not required to participate in the settlement, those that pursue their own action against the company risk a smaller level of compensation, or no compensation at all.

Regardless of their participation or compensation, VW owners will never forget that they were lied to. A brand recognized for its commitment to quality and, presumably, its commitment to clean diesel technology, has seen its reputation irrevocably tarnished and billions of dollars erased from its value.

Further details about the settlement are set to be released later this week.