Will VW’s Plan Pass Muster in US Court?

Volkswagen is scheduled to present its plan in a courtroom Thursday to settle complaints related to the company’s deliberate attempts to circumvent U.S. auto emissions rules. The deal the company is expected to propose was worked out with U.S. regulators, and it is expensive and not guaranteed to be accepted by the court. Even if it is accepted, it is unlikely to be the final word on the scandal.

VW’s plan, according to a report from Reuters citing people briefed on the matter, includes an agreement to buy back up to 500,000 of the nearly 600,000 VW diesel-powered vehicles in sold in the United States between 2009 and 2015. Another 80,000 Audi and Porsche vehicles are not included in the deal.

According to analysts at Kelley Blue Book, the remaining value on the cars sold in the United States is approximately $7.3 billion. As of March 2016, each diesel vehicle included in the proposed buyback is valued at $10,402. Germany’s Die Welt newspaper reported that the deal would pay U.S. owners $5,000. There is no information regarding VW’s ability to repair and resell the cars in the United States.

VW also reportedly has agreed to a $1 billion compensation fund for owners, but no details have emerged on this yet. The company also may offer to repair the offending vehicles, if regulators approve a fix for the problem.
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In addition, the company is very likely to be on the hook for a remediation payment to redress environmental damage from the excess emissions.

Karl Brauer, a senior analyst at Kelley Blue Book, said:

This is VW’s first major step toward resolving its diesel issue, though it still needs to be approved and may fall short of regulatory requirements. It’s also a very costly solution, particularly given how much the company has already lost in terms of market value and sales. Ultimately, this is a necessary part of the process and, as painful as it may be, VW has to address this issue before it can move forward.

VW is due to appear in U.S. District Court in San Francisco Thursday before Judge Charles Breyer, who last month set April 21 as a deadline for VW and U.S. regulators to propose a settlement.