WASHINGTON Jan 6 Volkswagen and the
Justice Department are nearing a deal to resolve criminal and
civil allegations over the German automaker's diesel cheating
while it won long-awaited approval from the Environmental
Protection Agency to fix about 70,000 diesel vehicles, crucial
steps toward moving past a scandal that has cost it billions of
dollars and its reputation.
A successful settlement is critical to the automaker's goal
of rebuilding its business in the United States, a market key to
its long-term growth plans and where VW brand sales were down 8
percent last year. Volkswagen will show off a new gas powered
SUV Sunday ahead of the Detroit auto show and will start selling
a new larger U.S. built gas powered SUV later this year.
The deal with the Justice Department could cost more than $4
billion and could be announced as early as next week, according
to several people familiar with the matter.
The approval on fixes with the EPA could help defray the
total price tag of the scandal that may top $20 billion in the
United States alone.
VW will also face the oversight of an independent monitor to
ensure it complies with the settlement, which could include
either a deferred prosecution agreement or guilty plea, and
significant conditions requiring reforms, the people briefed on
the talks said on Friday.
The people said Volkswagen will agree to a penalty of at
least $3 billion - and possibly more than $4 billion - to
resolve the government's investigation, though the deal remains
under negotiation and could still fall apart.
A VW spokesman in Germany declined to comment, saying the
automaker was in discussions with authorities, as did the
The world's second largest automaker is in intensive talks
to resolve the U.S. criminal investigation into its diesel
cheating that first came to light in September 2015 after it
admitted to using sophisticated software to rig diesel emissions
tests for more than six years.
The talks have advanced as prosecutors and VW seek to
resolve the case before President Barack Obama leaves office on
Jan. 20, according to people familiar with the probe. If a deal
is not reached before then it could significantly delay an
agreement, those people said.
The U.S. investigation into VW - and a successful resolution
- has faced hurdles as authorities at times struggled to obtain
documents from VW and interviews with its Germany-based
executives, according to people familiar with the investigation.
VW has said it is fully cooperating.
VW had previously agreed to pay up to $17.5 billion to
resolve claims by U.S. owners, federal and state regulators and
dealers and admitted it had misled regulators for years about
VW faces ongoing lawsuits from at least 19 U.S. states and a
judge ruled this week it must face investor lawsuits in a
The automaker will spend years fixing or buying back
vehicles and making investments to boost zero emission vehicle
infrastructure and must deposit nearly $3 billion in a trust to
offset excess diesel emissions. It has also agreed to boost the
number of electric vehicles it offers in California.
The EPA said Friday it had approved a fix for about 70,000
polluting Volkswagen diesel vehicles.
It involves new software available now. A second phase of
the fix will start about a year from now when VW will install
more software updates and new hardware, including a diesel
particulate filter, diesel oxidation catalyst and NOx catalyst.
VW admitted in September 2015 to installing secret software
known as "defeat devices" in 475,000 U.S. 2.0-liter diesel cars
to cheat exhaust emissions tests and make them appear cleaner in
testing. In reality, the vehicles emitted up to 40 times the
legally allowable pollution levels.
The German automaker agreed to buy back those 475,000
polluting 2009-2015 vehicles last June at a cost of as much as
$10.033 billion, or fix them if regulators approved. It still
must win approval to fix about 400,000 of those vehicles.
The company later admitted to also using "defeat devices" in
3.0-liter vehicles. The 80,000 3.0-liter U.S. vehicles had an
undeclared auxiliary emissions system that allowed them to emit
up to nine times allowable limits. It reached a deal last month
to offer to buy back 20,000 of the vehicles and fix the
remainder, but still is awaiting approval for the fix.
The scandal hurt VW's global business and reputation, and
led to the ouster of longtime chief executive Martin Winterkorn.
VW has been barred from selling any new diesel cars in the
United States since late 2015.
To date, only one VW employee has been criminally charged in
the United States. James Liang, who worked for VW since 1983 and
was part of a team of engineers who developed a diesel engine,
pleaded guilty in September and is cooperating with prosecutors.
(Editing by Soyoung Kim and Bernard Orr)