Here’s what the VW settlement means for NC consumers

Volkswagen will spend more than $15 billion to settle consumer lawsuits and government allegations that it cheated on emissions tests in what lawyers are calling the largest auto-related class-action settlement in U.S. history.

Under the settlement unveiled Tuesday, North Carolina consumers who own or lease Volkswagens will receive tens of millions of dollars in cash payments – theoretically, as much as $90 million – from the German automaker. The state also will receive at least $17 million in civil penalties, according to the office of Attorney General Roy Cooper.

The civil penalties will by law go to the state’s public schools.

Overall, once a federal judge approves the settlement – which could happen as early as this fall – VW will pay just over $10 billion to either buy back or repair about 475,000 vehicles with cheating 2-liter diesel engines – though at this time a fix has not been determined. The company also will compensate owners for their trouble with payments of $5,100 to $10,000, depending on the age of their vehicles.

The German automaker also has to pay governments $2.7 billion for environmental mitigation and spend another $2 billion for research on zero-emissions vehicles.

Volkswagen also settled consumer protection claims with more than 40 states, including North Carolina, agreeing to pay more than one-half billion dollars. That brings the total settlements announced Tuesday to $15.3 billion.

Cooper was one of more than 40 state attorneys general who, along with the federal government, agreed to the settlements.

VW is still facing billions more in fines and penalties as well as possible criminal charges.

Volkswagen has admitted that the 2-liter diesels were programmed to turn on emissions controls during government lab tests and turn them off while on the road. Lawyers are still working on settlements for another 80,000 vehicles with 3-liter diesel engines. The company got away with the scheme for seven years.

As part of the settlement, VW must offer to buy back most of the affected cars, or terminate their leases. That’s because, 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.

An investigation by the North Carolina attorney general’s office found that 17,550 Volkswagens covered by the settlement were purchased in North Carolina, spokeswoman Noelle Talley said in an e-mail. If all those cars remain in the state and are eligible for payment, consumers here would receive a total of about $90 million in cash – in addition to either selling their car back to Volkswagen for its “pre-scandal value” or having their car repaired by Volkswagen.

Owners who choose to have VW buy back their cars would get the clean trade-in value from before the scandal became public on Sept. 18, 2015. The average value of a VW diesel has dropped 19 percent since just before the scandal began. In August of 2015, the average was $13,196; this May it was $10,674, according to Kelley Blue Book.

If VW can come up with a repair that meets EPA and California standards, it’s likely to hurt the cars’ acceleration and fuel economy. Volkswagen marketed the cars as both more fuel efficient and better performing that those with regular gasoline engines.

The company has to buy back or repair 85 percent of the vehicles or pay even more money into an environmental trust fund.

“This historic agreement holds Volkswagen accountable for its betrayal of consumer trust and requires Volkswagen to repair the environmental damage it caused,” said Elizabeth Cabraser, the lead attorney for consumers who sued the company.

Unless it can develop a suitable fix, VW may be forced to buy back all the 2-liter vehicles. But it appears from documents filed by the Justice Department and EPA that the technology might not be available to fix them. VW has been working on a fix since around the time the scandal broke.

“At the present time, there are no practical engineering solutions that would, without negative impact to vehicle functions and unacceptable delay, bring the 2.0 Liter subject vehicles into compliance with the exhaust emission standards and the on-board diagnostics requirements,” the order said.

Volkswagen says the $10 billion consumer settlement assumes that it will buy back all of the cars.

“We take our commitment to make things right very seriously and believe these agreements are a significant step forward,” Volkswagen AG CEO Matthias Mueller said in a statement.

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 U.S. regulators revealed 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.

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. The EPA has since changed its testing to include on-road tailpipe checks.

The vehicle buy back and repair program will be managed by a claims administrator who will contact consumers about how to make a claim. Full details of the agreement are online at VWCourtSettlement.com. Owners have until Sept. 1, 2018, to decide whether to ask for a fix (if one exists by then) or a buy back.

N&O staff writer David Ranii contributed to this story.

This story was originally published June 28, 2016 at 12:27 PM with the headline "Here’s what the VW settlement means for NC consumers."