Volkswagen settles U.S. emissions lawsuit, but Canadian owners still waiting

Volkswagen will repair or buy back every one of its polluting vehicles on U.S. roads under a $14.7-billion US deal the automaker has reached to settle lawsuits stemming from its emissions-cheating scandal.

In a deal announced by U.S. regulators Tuesday, the automaker will pay the money to buy back roughly half a million diesel cars that spew far more emissions into the air than claimed, because the automaker installed so-called "defeat devices" on them designed to ace emissions tests while belching out more than three dozen times the legal limit of pollutants in real-world driving scenarios.

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Up to $10 billion of that total will go to buying back cars at their "fair value" U.S. Deputy Attorney General Sally Yates said Tuesday, and pay an additional compensation to owners of between $5,000 US and $10,000 US per owner. But owners will also have the option of keeping their cars and having them fixed. The exact cost will depend on how many drivers of the two-litre TDI diesel vehicles between the 2009 and 2014 model years opt to sell their cars back to the automaker.

The remaining $4.7 billion US will come in the form of a $2.7 billion fine — the largest ever levied in the history of the U.S. Clean Air Act — and company has agreed to to spend $2 billion US on the development of zero emissions vehicles.

"We can't undo the damage that Volkswagen did to our air quality," Yates said at a press conference with other regulators Tuesday.

The company still faces class action and other lawsuits, but the settlement details bring a close to one of the biggest question marks of the emissions scandal.

Canada not explicitly included

It does not, however, bring any such closure to Canadian Volkswagen owners who have been left in the lurch through the process.

"While the settlement terms in the U.S. proceeding will be a consideration for the Canadian discussions, settlement details coming out of the U.S. court proceeding may not apply to Canada," Volkswagen said.

"Our hope is to provide remedies to Canadians on pace with U.S. customers."

Volkswagen Canada is working with stakeholders involved in several dozen legal proceedings and hopes to have an update on the details of those negotiations by the end of July.

"Volkswagen takes this matter very seriously and continues to work with Canadian regulators to resolve this issue for all affected customers. 

There's still the pressing question of how, exactly, the company plans to actually fix the engines.

According to court documents filed Tuesday, there currently is no repair that can bring the cars into compliance with U.S. pollution regulations. If VW does propose a repair, it must be approved by the Environmental Protection Agency and the California Air Resources Board.

The settlement still requires a judge's approval before it can go into effect, but if that happens the program could roll out as soon as this fall. Owners can choose to decline Volkswagen's offer and sue the company on their own.

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Don Marron, a banker from Allentown, Penn., who owns a 2012 Jetta SportWagen diesel, said he's glad Volkswagen is offering more compensation than earlier reports had suggested. But Marron wants assurance that if Volkswagen fixes his car but he doesn't like the way it performs, the company will still buy it back. And if he keeps his car and saves Volkswagen money, he wants compensation for doing that.

"At this moment, I don't know anything more than I did a couple of months ago," he said.

The scandal erupted in September when it was learned that the German automaker had fitted many of its cars with software to fool emissions tests and had put dirty vehicles on the road. Investigators determined that the cars emitted more than 40 times the legal limit of nitrogen oxide, which can cause respiratory problems in humans. Car owners and the U.S. Department of Justice sued.

VW is still facing billions more in fines and penalties, a lawsuit by state attorneys general and potential criminal charges.

The $14.7 billion US settlement also does not include another roughly 90,000 3-liter Volkswagen diesels, which had another version of cheating software.

VW in April took an $18.2 billion charge to cover the cost of the global scandal, which includes a total of 11 million vehicles worldwide.

The company has admitted developing sophisticated software that determined when the cars were being tested by the EPA on a treadmill-like device called a dynamometer and turned on the pollution controls. Once all wheels began spinning and the steering wheel was turned, the controls were turned off.

The company, which knew the EPA's testing routine, got away with the scam for seven years before being caught by the International Council on Clean Transportation, which hired West Virginia University to test a VW in real roads conditions.