VW Could Face Tens of Billions in Additional Compensation Costs

The Detroit Bureau

Senior EU official wants same compensation for European diesel owners.

Volkswagen is expected to close a deal requiring it to pay $14.7 billion to settle charges it cheated on diesel emissions tests.

Under the agreement with U.S. and California authorities, the German maker will provide owners of vehicles equipped with its 2.0-liter turbodiesel at least $5,000 in compensation, and possibly a lot more if they choose to have VW buy back one of the affected vehicles.

But the settlement only covers the nearly 500,000 2.0-liter TDI models sold in the U.S. during the 2009 to 2015 model-years – with a separate settlement to follow covering a 3.0-liter model, as well. That fact isn’t sitting well with European consumers and regulators who feel the automaker should provide compensation there, as well.

“Volkswagen should voluntarily pay European car owners compensation that is comparable with that which they will pay U.S. consumers,” European industry commissioner Elzbieta Bienkowska told the German newspaper Welt am Sonntag.

VW has acknowledged it equipped about 11 million vehicles using the 2.0-liter diesel with a so-called “defeat device,” software capable of detecting when one of the vehicles is undergoing emissions tests. In such a case, the engine control system settings are modified to sharply reduce levels of pollutants such as particulates and smog-causing oxides of nitrogen.

But the primary focus of that subterfuge was the U.S. market, where diesel emissions standards have traditionally been far more stringent than in Europe. In fact, VW long boasted about its ability to meet those targets while also delivering exceptional mileage and solid performance. In Europe, the diesels appear to have come closer to government standards and, in some models complied with the law.

Nonetheless, “Treating consumers in Europe differently than U.S. consumers is no way to win back trust,” said Bienkowska.

In fact, consumer concerns have led to a sharp drop in Volkswagen sales in both the U.S. and European markets.

Despite the fact that the maker has agreed to update European models with the 2.0-liter diesel – a fix that requires software changes on some vehicles and additional hardware updates on others – VW has so far declined to offer EU owners any compensation.

It is unclear if European Union regulators will take steps to force the issue. But industry analysts warn that a settlement matching that in the U.S. could be financially devastating for the German carmaker. The compensation portion of the U.S. settlement alone will come to just over $10 billion.

And that’s for less than 500,000 vehicles. If even 5 million of those owning affected diesel models were to receive U.S. levels of compensation the total would come to over $100 billion, a figure that would bankrupt the company, said industry analyst Joe Phillippi, of AutoTrends Consulting.

Phillippi said he doubts the EU would make such a move, and anticipates the German government would move to block such a settlement.

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