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Volkswagen Aims to Clear the Air With $15B US Settlement

By Richard Adhikari
Jun 28, 2016 10:02 AM PT

Volkswagen on Tuesday announced that it has reached an agreement to settle claims arising from the emissions scandal that has plagued the company since its discovery two years ago.

The company has agreed to set up a US$10 billion funding pool to buy back or terminate leases of diesel vehicles sold in the United States. Volkswagen had used software to cheat on emissions tests in labs for its turbocharged direct injection diesel engines.

Planned Pollution

The vehicles emitted up to 40 times more nitrogen oxides in real-world driving than the company registered in lab tests using the deceptive software. Volkswagen had put the software in about 11 million cars worldwide, of which about 500,000 were in the United States.

The vehicles in question were from the model years 2009 through 2015.

Volkswagen also agreed to establish a $2.7 billion environmental remediation fund, and to invest $2 billion to promote adoption of zero-emissions cars in the U.S.

The Department of Justice, the State of California, the Federal Trade Commission and certain private plaintiffs have agreed to the deal, which also must be approved by Judge Charles Breyer of the U.S. District Court for the Northern District of California.

Actions Against VW

The DoJ early this year filed suit against Volkswagen and associated companies over the emissions scandal, and the FTC in March filed its complaint in federal court.

German prosecutors earlier this month began investigating former VW employees, including former CEO Martin Winterkorn, over allegations of fraud and market manipulation in relation to the emissions scandal.

Other countries' regulators also are examining VW closely.

The company's next course of action is to tackle the international problem, said Praveen Chandrasekar, a research manager at Frost & Sullivan.

"VW is rumored to have set aside almost 16 billion euros (US$18.2) for the scandal at the worldwide level," he told the E-Commerce Times.

Crime and Punishment

"A penalty should be large enough so that not only doesn't the offending firm repeat its crime, but also no other firm even thinks of doing something like this," commented Rob Enderle, principal analyst at the Enderle Group.

The emissions scandal was brought to light "by pure chance, which means the government wants to use fear as its primary method for compliance," he told the E-Commerce Times.

The scandal "showcases the importance of governance and internal audit to catch things like this," Enderle suggested. "This is a huge reminder that strong compliance and internal audit programs can literally save companies billions."

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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