Volkswagen confirms $4.3bn US settlement over diesel emissions
VW had raced to get a deal done before president Barack Obama leaves office
VW admitted in September 2015 to installing secret software in hundreds of thousands of US diesel cars to cheat exhaust emissions tests and make them appear cleaner than they were on the road
Volkswagen has confirmed it has negotiated a $4.3 billion (€4.1 billion) draft settlement with US regulators to resolve its diesel emissions troubles and plans to plead guilty to criminal misconduct.
The guilty plea is part of the civil and criminal deal as the carmaker attempts to restore its tarnished global brand. Volkswagen said that with the addition of the fine, its costs associated with the scandal will exceed the nearly €18.2 billion it has set aside to handle the problem. The company also said it will face oversight by an independent monitor over the next three years.
Reuters reported earlier the company’s supervisory board is set to meet on Wednesday to approve a civil and criminal settlement with the US justice department over the carmaker’s diesel emissions. VW said the supervisory board and the management board would meet lateon Tuesday or possibly Wednesday to approve the deal.
VW is expected to plead guilty as part of the settlement as early as Wednesday, a source said. The plea deal will need the approval of a US judge.
Evercore ISI, an investment banking firm, said it believes the “settlement is intended to draw a line under all remaining US related legal risk. This is good news.”
VW had raced to get a deal done before US president Barack Obama leaves office on January 20th. A change in administration could have delayed a final settlement for months if not longer.
“The most important news is that VW managed to come to an agreement that allows the company to move on from here. It’s a major relief that this doesn’t get dragged into the new US administration,” Evercore ISI said.
VW admitted in September 2015 to installing secret software in hundreds of thousands of US diesel cars to cheat exhaust emissions tests and make them appear cleaner than they were on the road, and that as many as 11 million vehicles could have similar software installed worldwide.
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On Monday, a VW executive, Oliver Schmidt, the second VW employee charged by US prosecutors, was accused of conspiracy to defraud the United States over the company’s emissions cheating and the carmaker was accused of concealing the cheating from regulators.
The US justice department settlement with VW will not end the investigation into individual misconduct and more executives may face charges, sources said.
VW still must spend the next two years buying back or fixing dirty US vehicles and faces unresolved lawsuits from investors and about 20 US states.
Volkswagen’s expected guilty plea is in contrast to deferred prosecution agreements with Toyota and General Motors, which were both accused of misleading regulators or consumers and paid fines of $1.2 billion and $900 million, respectively, but were not required to plead guilty.
VW warned in a financial disclosure the impact of the US settlement on 2016 group results cannot be quantified yet, citing “various further factors.”
VW said in late October it expected the group operating margin to come in at the upper end of a 5 to 6 per cent target range before one-off items, compared with 6 per cent in 2015.
The carmaker is due to announce 2016 results on March 14th.
Separately, Porsche, the main shareholder of VW, issued a profit warning after the VW news.
The settlement on US criminal and civil fines will negatively affect Porsche’s results for 2016, the company said, adding it is possible the net result may drop below the previously reported range of €1.4-2.4 billion.
Volkswagen had previously agreed to spend up to $17.5 billion in the United States to resolve claims by US regulators, owners and dealers and offered to buy back nearly 500,000 polluting vehicles.
Much of the company’s senior management departed following the scandal, including chief executive Martin Winterkorn.
VW Group said on Tuesday it had record sales in 2016 of 10.3 million vehicles, including a 12 per cent increase in December. That figure should put VW ahead of Japanese rival Toyota as the world’s largest car producer by volume for the year.
On Monday, VW shares rose 4.2 per cent to their highest since September 2015 on optimism about the expected US criminal settlement, topping the German blue-chip DAX index. The shares are still 10 per cent below pre-scandal levels.
VW shares closed up less than 0.2 per cent in trading Tuesday in Frankfurt before the company’s announcement.