VW's emissions-scandal tab climbs above $15 billion

Volkswagen's price to settle lawsuits in the United States over its rigging of diesel-emissions tests has jumped to more than $15 billion - $5 billion more than previously reported - on the eve of a settlement to be filed Tuesday in a San Francisco court.

Under the deal, VW will set aside $10.03 billion to cover costs including buying back vehicles at pre-scandal values and compensating drivers as much as $10,000 per car for their troubles, two people familiar with the negotiations said. Those figures could rise if VW misses certain deadlines.

In addition, Volkswagen will pay $2.7 billion in fines that will go to the U.S. Environmental Protection Agency and the California Air Resources Board, and $2 billion to clean-emissions technology, one of those people said. The carmaker also is expected to announce a settlement with states for about $400 million, another person said.

That total far exceeds any previous U.S. civil settlement with an automaker, and it brings VW closer to the $18.3 billion it has set aside to cover the costs of the scandal. But it won't put an end to VW's legal troubles spanning three continents, as the company still faces civil and criminal actions in other jurisdictions.

The compensation figure jumped over the last few days, the people familiar with the negotiations said, as the parties changed their estimates on what it would take to get about 85 percent of the cars' owners to trade in their vehicles under the settlement.

VW, whose brands include Audi and Porsche, has admitted systematically rigging environmental tests since 2009 to hide the fact that its diesel vehicles were emitting far more pollutants than are allowed under U.S. and California law.

Wyn Hornbuckle of the U.S. Justice Department, Jeannine Ginivan of Volkswagen, and Nick Conger of the EPA declined to comment.

The latest settlement figure is a sharp increase from the $10 billion Volkswagen had been expected to pay as recently as last week. The agreements between VW and the Justice Department, the EPA, and the California Air Resources Board are to be filed with U.S. District Judge Charles Breyer by 3 p.m. Philadelphia time Tuesday. Breyer is overseeing more than 800 lawsuits involving rigged vehicles.

To participate in the settlement plan, if it is approved by the judge, car owners will have to surrender their automobiles or agree to have them retrofitted to meet emissions standards. No fix for the vehicles has been approved by environmental regulators, people familiar with the talks have said. VW has until the end of 2018 to come up with a viable update, one said.

The Volkswagen settlement would be one of the largest in corporate history, exceeded by the $246 billion agreement between the tobacco industry and U.S. states in 1998, and the multiple payments to private parties and governments over the 2010 BP oil spill.

BP's final bill is not yet known, but it includes agreements to pay more than $25 billion to the U.S. government and states, and at least $12.9 billion for claims of private-property and economic loss.

The rising cost of the U.S. settlement raises the question of whether VW has set aside enough money to put the scandal behind it. Maryann Keller, an independent auto industry consultant in Stamford, Conn., said the answer depends on how non-U.S. consumers and governments react.

"The bigger problem is if people in other countries and other governments want a similar deal," Keller said. "If they do, I don't think $18 billion will cut it."

European governments and consumer groups are pressing VW to provide compensation similar to the amounts expected to go to U.S. car owners for the roughly 8.5 million owners of VW diesel models on the road there, raising the possibility that the automaker's expenses related to the scandal will rise further still.

The U.S. settlement is expected to make up the lion's share of VW's overall cost for the scandal, but other legal action is still pending. The company still faces criminal investigations in the U.S., Germany, and South Korea.

Auto dealers and resellers have sued VW as class actions alleging fraud and false advertising. While few of Volkswagen's authorized dealers have sued over lost sales, they may be looking to Tuesday's plan to determine whether to abide by the company's approach or take an adversarial stance.

The plan may also leave unresolved what will be done if car owners simply refuse to stop driving their cars, which would prolong the environmental effects.

"I'll probably just keep driving it," Marcus Frye, a mechanic from Redwood City, Calif., said of his 2010 VW Jetta diesel model. Frye recently tried to sell the car on Craigslist for $11,500, about three-quarters of what he had paid a year earlier.

But after he noticed that the Kelley Blue Book value had dropped to $6,000 because of the emissions scandal, he pulled the ad. "If the value of the car is basically junk, why would I give it away to anyone?" Frye asked.

Investors in the U.S. and Germany are suing VW for what they describe as massive losses in the days following the Sept. 18 disclosure that the company had installed a so-called defeat device on 11 million vehicles to beat emissions tests in the U.S. and Europe. Holders of American Depository Receipts, whose claims also will not be covered in Tuesday's agreement, say the scandal has cost them hundreds of millions of dollars.

Volkwagen's shares have lost 28 percent of their value since the disclosure.

The announcement Thursday that South Korean prosecutors had arrested a VW executive there may be "the tip of the iceberg," said Anthony Sabino, a law professor at St. John's University in New York who specializes in complex litigation. More prosecutors or regulators worldwide may pursue additional actions following the settlement with the U.S., he said.

"There are plenty of public-minded, or just ambitious, politicians and bureaucrats who'll be ringing up VW: 'You gave the Americans this. We want some,' " Sabino said.

The agreement with the U.S. will also put Volkswagen under an international microscope through a consent decree that will probably include federal monitoring of its compliance, Sabino said: "The U.S. will be watching their every move."