Washington — Volkswagen plans to pay $1 billion to owners of its diesel cars that were rigged to cheat federal emission standards as the automaker tries to move past a scandal that has badly damaged its image in the United States.
A person briefed on the matter told the Associated Press that Volkswagen reached agreement with the U.S. government to spend just over $1 billion to compensate owners of the 550,000-plus U.S. diesel vehicles on which the automaker installed software to skirt federal emission rules.
The person said it’s an agreement in principle that does not include final details of how much each owner will get. Some owners would have the option of getting their cars repaired or having Volkswagen buy them back.
The agreement likely will be revealed Thursday during a court hearing in San Francisco. The person says it will not include plans to fix the cars, which apparently are still under negotiation.
The person didn’t want to be identified because terms of the deal are not public.
Compensation of $1 billion works out to about $1,700 per car. But owners of newer cars that require just a software patch may see little compensation. Those with older cars requiring more complicated repairs probably would be paid more because fuel mileage and performance would suffer.
Volkswagen, the U.S. Environmental Protection Agency and Justice Department all declined requests from The Detroit News for comment on the reported agreement before Thursday’s hearing.
A federal judge had ordered Volkswagen to submit a plan for repairs or compensation for the owners of the diesels by Thursday. That deadline was a one-month extension of a previous mandate that was missed. A previous plan by Volkswagen plan to fix 8.5 million diesels in Europe did not meet California’s more stringent standards.
The beleaguered German auto company also is facing angry U.S. drivers and car dealers who are upset about the impact of the emissions scandal on the value of their cars and businesses. They are impatient for answers seven months after revelations about the cheating became public.
U.S. sales of the Volkswagen brand were down 12.5 percent in the first three months of 2016 compared to the same period a year ago. And lawyers representing thousands of Volkswagen diesel owners want the judge to order compensation and repairs if the company doesn’t offer a satisfactory fix by Thursday.
The German automaker was accused by the EPA in September of selling diesels for years with software that activated required air pollution equipment only during emissions tests. They had been marketed as “clean diesels” for the company’s Volkswagen, Audi and Porsche brands between 2008 and 2015.
Volkswagen has admitted to programming its diesel cars to trick emissions testers into believing the engines released far less pollution into the air than they actually do, in violation of the federal Clean Air Act. Regulators have said that in normal driving they emitted up to 40 times more nitrogen oxide than the legal limit.
Sebisban Merca, 32, of Ann Arbor, believes it is taking him longer to sell his diesel-powered 2012 Jetta than it would have before the emissions scandal.
“Last year, if you (tried to) sell a TDI, when you put it on Craigslist it would sell in one week. But now it’s hard,” Merca said. His car has been listed for sale since March 29.
Cristian Filip, 38, of Taylor, was less concerned about the agency’s standoff with the EPA. Filip, who is selling a diesel 2014 Passat, dismissed complaints from federal regulators against the German automaker as “all politics.”
“If you ride in the back of a school bus, that’s 100 times worse than riding in the back of my Passat,” he said of the environmental impact of the higher-than-advertised amount of pollution that is emitted by his car.
Volkswagen is counting on drivers like Filip remaining loyal as it looks to rebound. Alex Thayer, general manager of Ralph Thayer Volkswagen in Livonia, said Volkswagen’s diesel cars accounted for 20 percent of his dealership’s sales before their sale was forbidden by the EPA last fall.
Thayer said the emissions scandal is “pretty new territory” for dealers. “You have to have a healthy business when a problem like this occurs so you can sustain yourself,” he said.
He said he’s been able to sustain the dealership by pushing gasoline models. He added that he is still able to sell used diesels, but can no longer market them as “certified” clean diesel cars.
‘It ... hasn’t gotten better’
Alan Brown is president of Volkswagen’s U.S. Dealer Advisory Council and general manager of Lewisville Volkswagen in Texas. He said many of the 652 U.S. dealers were hit hard by the loss of Volkwagen’s turbocharged direct-injection diesels — marketed as TDI.
“I talked to some California dealers where TDI is 40 percent of their business, so it’s a big loss for them,” he said. “There are a lot of great dealers that have taken steps to deal with this. It definitely hasn’t gotten better with time.”
Brown said he pushed Volkswagen’s German leadership to meet with U.S. dealers at the recent National Automobile Dealers Association convention in Las Vegas. “A lot of dialogue needed to be had related to brand imaging (and) how do we resolve TDI,” he said.
He said Volkswagen had a larger turnout for its company meeting than any other brand because dealers are hungry for a resolution. He said Volkswagen leaders have expressed confidence to U.S. dealers that the fix it is working on will satisfy the EPA.
“I think for the most part everybody walked away with an understanding of the short-term plan,” Brown said. “We all walked out of the meeting feeling like we were better together than we are apart.”
Kelly Blue Book said the average auction value of used diesel Volkswagens decreased from $14,153 in June 2015 to $10,402 in March of this year. By comparison, the average value of gasoline Volkswagens only fell from $10,946 to $9,815 in the same period.
Matt DeLorenzo, managing editor for Kelley Blue Book’s KBB.com, predicted it would be a while before Volkswagen can fully escape the cross-hairs of federal regulators, even if the company satisfies the EPA’s demands with the reported agreement.
“While the money will go a long way to keep customers happy, meeting emission standards is still a major problem,” he said.
“Whatever Volkswagen has to do to the cars themselves will cost more money, and the question remains of how to get the owners to bring back in all the cars for a fix,” DeLorenzo continued. “Plus, I believe the government agencies are not only looking for compliance, but also punitive measures because of the deliberate nature of the scam.”