Settlement for $1.21 billion reached between Volkswagen and U.S. dealerships

By Lulu Chang Published October 2, 2016

The emissions scandal that has plagued Volkswagen for the better part of a year may finally be coming to an expensive close. Late Friday, a federal court filing was submitted, and showed that the beleaguered German carmaker has settled with 652 U.S. dealerships to the tune of $1.21 billion. This translates to an average payout of about $1.85 million per dealer, and is meant to compensate for the losses many of these businesses experienced following reports last year that Volkswagen cheated emission standards by rigging around 600,000 U.S. diesel vehicles with illegal software.

The settlement has yet to be finally approved by a San Francisco judge, and it doesn’t necessarily mean the end of the road for disgruntled dealers or for Volkswagen itself. If dealers are not satisfied with the settlement, they have the option to opt out of the current case, and go to court against Volkswagen individually.

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This $1.21 billion deal is entirely separate from a much larger settlement involving Volkswagen, the American government, California regulators, and consumers that will set VW back $14.7 billion.

This particular settlement is split among restitution and buybacks, lessening the impact of excess emissions, and promoting clean cars, with the vast majority allocated to restitution and buybacks, according to a Chicago Tribune report. “Although we called for buybacks at full purchase price, $10 billion for buybacks and additional compensation is a win for consumers,” Mike Litt of U.S. PIRG Education Fund, a consumer advocate group, told the Tribune. Moreover, VW must either fix or remove from the roads at least 85 percent of the cars it rigged by June 30, 2019. If this is not achieved, the company faces additional fines to be paid to an environmental mitigation fund.

But even in the midst of this crisis, don’t expect to see Volkswagen disappear from the auto scene altogether anytime soon. “We continued to see owners shopping for VWs at levels that are in line with other brands, and most perceptions of the brand have rebounded,” said Rebecca Lindland, senior analyst for Kelley Blue Book. Noting that Volkswagen customers have displayed “amazing loyalty” over the past year, she added, “news of [VW’s] death are greatly exaggerated.”

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