The deal comes two months after U.S. District Judge Charles Breyer granted final approval to a historic $14.7 billion deal, in which Volkswagen agreed to buy back or modify 482,000 vehicles with 2-liter diesel engines.
The second settlement signals the latest fallout over the German automaker’s use of cheating software in an estimated 11 million vehicles worldwide, which was first made public by the U.S. Environment Protection Agency in September 2015.
The defeat-device software kicks in when cars are being tested, making them emit less pollution than when on the road. With the device turned off, the cars spew up to 40 times more nitrogen oxide than allowed by U.S. standards.
“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,” Assistant Attorney General John C. Cruden said in a statement Tuesday. “This consent decree provides a remedy for every affected vehicle which will be removed from the road or meet enforceable standards that will reduce emissions, and will also require VW to provide additional funding to address the harmful impacts to human health and the environment from VW’s violations.”
Under the terms of two consent decrees filed on Tuesday, Volkswagen must offer to buy back or terminate leases for “generation 1” 3-liter engine vehicles. It must also offer to modify those vehicles to reduce their emissions if it comes up with a fix approved by U.S. regulators. The “generation 1” vehicles include 2009 through 2012 Volkswagen Touareg and Audi Q7 diesel models.
Volkswagen must also come with an approved plan to bring “generation 2” vehicles up to acceptable emission standards or offer to buy back or terminate leases for those vehicles. The “generation 2” vehicles include 2013-2016 Volkswagen Touareg diesels, 2013-2015 Audi Q7 diesels, 2013-2016 Porsche Cayenne diesels and 2014-2016 Audi A6 quattro, A7 quattro, A8, A8L and Q5 diesel models.
If the automaker fails to recall 85 percent of “generation 1” vehicles by Nov. 30, 2019, or to recall or fix 85 percent of “generation 2” vehicles by May 31, 2020, it must pay additional fines. Those penalties include $900,000 to $21 million fines for every 1 percent of affected vehicles below the 85 percent target.
Volkswagen’s $225 million payment will be added to $2.7 billion the automaker paid in the prior settlement. That money will fund a mitigation trust for nitrogen oxide reduction projects across the country.
The state of California received a $66 million slice of the $225 million payment, tacked on to $1.8 billion it received as part of the prior settlement.
“Volkswagen exploited Californians seeking environmentally friendly vehicles, harming consumers and our environment in pursuit of profit,” California Attorney General Kamala Harris said in a statement Tuesday. “We will continue to pursue every possible avenue to hold Volkswagen accountable for violating our environmental protection laws, mitigate the damage that was done, and secure relief and compensation for consumers who were deceived.”
The Golden State will apply $25 million of the new $66 million payment to provide incentives for the purchase of zero-emission vehicles.
As part of its deal with California, Volkswagen also pledged to sell three new battery-powered electric SUVs in the state by 2020 and to continue selling those vehicles through 2025.
The new partial settlement reached Tuesday does not release Volkswagen from any potential criminal liability, nor does it resolve claims by the Federal Trade Commission or individual consumers, according to the Justice Department.
The German automaker has faced a cascade of lawsuits from consumers, investors, dealers and others across the globe since the emissions cheating scandal was first made public more than 15 months ago.
In a statement issued Tuesday, Volkswagen Group of America’s president and CEO Hinrich J. Woebcken called the settlement “another important step forward in our efforts to make things right for our customers.”
“We support the efforts of the court to bring about a fair and reasonable resolution of remaining 3.0L TDI V6 claims as quickly as possible,” Woebcken said. “We are committed to earning back the trust of all our stakeholders and thank our customers and dealers in the United States for their patience as the process moves forward.”