The Final Cost For VW’s Fuel Emission Scandal Is Eye-Popping

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Chris White Tech Reporter
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Volkswagen’s fuel emission cheating scandal will cost the company nearly $15 billion, a person briefed on the settlement said Monday, but will not resolve all of the legal issues associated with the scandal.

The deal, which sets aside $10 billion to fix or buy back the 475,000 diesel vehicles tainted with cheat devices, represents the largest automotive settlement in history. Customers can either sell their cars back to the German auto company, or have them repaired.

Regardless of the customer’s decision, they will receive a payment of $5,100 to $10,000, the source told reporters, asking not to be identified until the plan is made permanent Tuesday.

However way the plan rolls out, customers’ vehicles will lose value, as they will receive the clean trade-in value for their vehicle prior to the scandal.

The average value of a VW diesel has plummeted nearly 20 percent since before the scandal began in September 2015. The average value of the vehicles was $13,196 in August, before the scandal, and this May the value was pegged at $10,674, according to Kelley Blue Book.

The settlement, according to the source, also includes $2.7 billion for environmental mitigation and another $2 billion for research for renewable technology.

VW admitted in September to installing so-called defeat devices in hundreds of thousands of diesel-powered vehicles in the U.S.

There are still several issues yet to be resolved – for instance, customers are concerned VW may not compensate them if their vehicles’ performance is hindered by the repairs.

Don Marron, a banker from Allentown, Pennsylvania, who owns a 2012 Jetta SportWagen diesel, told reporters that he wants assurances the company will still buy back his vehicles if the performance is hurt. He also wants compensation if he decides to keep the vehicle and save the company money.

“At this moment, I don’t know anything more than I did a couple of months ago,” he said.

VW set aside $18.2 billion to cover the cost of the global scandal, which, as of June, includes a total of 11 million vehicles worldwide.

Despite the scandal, the German-based automaker managed to return to profitability during 2016’s first quarter after reporting enormous losses in 2015.

VW managed to stop hemorrhaging profits after the company reported a smaller than expected drop in net profits during the first three months of 2016. VW’s profits dropped by only $2.57 billion, which is below the $3.2 billion drop in profit the company incurred during the same period last year. Analysts projected the company would see a 15 percent drop in profit.

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