The Volkswagen group confirmed on Tuesday that it has negotiated a $4.3bn (£3.53bn) draft settlement with US regulators to resolve its diesel emissions troubles, alongside plans to plead guilty to criminal misconduct charges.
The guilty plea is part of the deal to settle the scandal, as the carmaker looks to restore its tarnished global brand. Volkswagen (VW) said that, with the addition of the fine, its diesel scandal costs will exceed the nearly €18.2bn (£15.76bn) it set aside to handle the problem. VW added that it will face oversight by an independent monitor over the next three years.
The company’s supervisory board is to meet on Wednesday to approve the civil and criminal settlement with the US Justice Department. VW said the supervisory board and the management board would meet on Tuesday or Wednesday to approve the deal. The plea will need the approval of a US judge.
Investment group Evercore ISI said in a research note that it believes the “settlement is intended to draw a line under all remaining US-related legal risk. This is good news.
“The most important news is that VW managed to come to an agreement that allows the company to move on from here. It’s a major relief that this doesn’t get dragged into the new US administration,” Evercore ISI said.
VW has raced to get a deal done before President Obama leaves office on 20 January, amid fears that a change in administration could drag out the settlement for months.
VW admitted in September 2015 to installing secret software in hundreds of thousands of US diesel cars to cheat exhaust emissions tests and make them appear cleaner than they were on the road. As many as 11m vehicles could have similar software installed worldwide.
On Monday, a VW executive, Oliver Schmidt, the second VW employee charged by US prosecutors, was accused of conspiracy to defraud the United States over the company’s emissions, cheating and the automaker was accused of concealing the fraud from regulators.
The Justice Department’s settlement with VW will not end its investigation into individual misconduct and more executives may face charges, sources said.
VW must still spend the next two years buying back or fixing dirty U.S. vehicles as well as facing unresolved lawsuits from US investors and about 20 US states.
Volkswagen’s expected guilty plea is in contrast to Justice Department deferred prosecution agreements with Toyota Motor Corp and General Motors Co, which were both accused of misleading regulators or consumers and paid fines of $1.2bn and $900m respectively but were not required to plead guilty.
VW warned in a financial disclosure that the impact of the US settlement on 2016 group results cannot be quantified yet, citing “various further factors”.
In late October, the manufacturer said it expected the group’s operating margin to come in at the upper end of a 5% to 6% target range before one-off items, compared with 6% in 2015. The carmaker is due to announce 2016 results on 14 March.
Porsche SE, the main shareholder of VW, issued a profit warning after the VW news.
The settlement on US criminal and civil fines will negatively affect Porsche SE’s results for 2016, the company said, adding that it is possible the net result may drop below the previously reported range of €1.4bn to €2.4bn.
On Tuesday, VW Group said it had record sales of 10.3m vehicles last year, including a 12% increase in December. That figure should put VW ahead of Japanese rival Toyota as the world’s largest car producer by volume for the year.
On Monday, VW shares rose 4.2% to their highest level since September 2015, topping the German blue-chip DAX index, thanks to optimism about the expected US criminal settlement. The shares are still 10% below pre-scandal levels.
(Published by The Guardian - January 11, 2017)