The cost of Volkswagen's 'dieselgate' is staggering

Big chunk goes to buying back cars
by Paul Horrell | Jul 31, 2016

The details of Volkswagen’s punishment and compensation for the diesel cheat scandal in America have been revealed. And it’s massive. Total cost to VW will be $14.7 billion (P692.66 billion).

The company will offer to buy back or pay off the loans for all half-million cars with the 2.0TDi engine it sold in the US from 2010 to 2015, at their value before the scandal broke. These are Golfs, Jettas, Beetles, Passats and Audi A3s. The US authorities expect that will cost up to about $10 billion (P471.2 billion).

Just stop and try to imagine what’s involved here, taking back and scrapping such a huge number of cars. It’s a year’s output for a very large factory.

Actually, the settlement allows customers an alternative to the buy-back. They can choose to have their cars modified by VW, so as to bring them into legal emissions compliance. Trouble is, VW hasn’t developed such a fix yet for any of the models in question, in spite of several attempts.

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But that’s not all. VW is being required to spend $2.7 billion (P127.22 billion) on air-cleanup programs in the states where the cars were driven. The fund, designed to reduce nitrogen oxides, will be run by an independent trustee.

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Finally, another $2 billion (P94.24 billion) will be set aside over the next decade to encourage sales of electric cars. The Environmental Protection Agency says: “This investment is intended to address the adverse environmental impacts from consumers’ purchases of the 2.0-liter vehicles, which the governments contend were purchased under the mistaken belief that they were lower-emitting vehicles.”

So that’s the legal settlement. But on top of all this is an unknown figure for the damage dieselgate has done to the company’s reputation and future sales in the US. Which matters as it’s about to launch a vital new SUV, built in the US and designed with that country in mind.

So that’s the cost for just one market. It doesn’t count the recalls and possible fines for a vastly larger number of cheating cars sold across Europe and elsewhere. (Luckily, VW doesn’t sell diesels in its other main market, China.) However, in Europe, the recalls are simple. That’s because European NOx standards were more lax than the US, so it’s relatively inexpensive to bring the cars into compliance with the standards that applied at the time they were new. Makes you wonder why they cheated in Europe in the first place.

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NOTE: This article first appeared on Minor edits have been made.


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