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VOL. 132 | NO. 8 | Wednesday, January 11, 2017

Volkswagen: Draft Deal in Scandal Contains $4.3B in Fines

By DAVID McHUGH, AP Business Writer

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FRANKFURT, Germany (AP) – German automaker Volkswagen AG said Tuesday that it was in "advanced talks" with United States authorities over a proposed settlement in its diesel emissions scandal under which the company would pay $4.3 billion in criminal and civil fines.

The draft settlement with the U.S. Department of Justice and U.S. Customs and Border Protection would include the appointment of an independent monitor to oversee the company's compliance and control measures for three years.

A company statement issued Tuesday said that under the proposal Volkswagen would agree to "a guilty plea" to criminal law provisions.

The draft needs to be approved by Volkswagen's boards and U.S. courts. Volkswagen said its management board of top executives, which includes CEO Matthias Mueller, and its board of directors would deal with the issue "in the very short term," as soon as Tuesday or Wednesday.

"A final conclusion of the settlement agreement is further subject to the execution by the competent U.S. authorities and to the approval of the competent U.S. courts," the company said.

The penalties would exceed the amounts Volkswagen has set aside to cover costs from the scandal, but the specific impact on 2016 earnings "cannot be defined at present," the statement said. Volkswagen had already deducted 18.2 billion euros ($19.2 billion) from earnings to account for the expected costs of fines, settlements and recalls.

The company has admitted equipping diesel cars with software that turned up emissions controls when the car was being tested, and turned them down during normal driving, improving engine performance but exceeding emission limits.

Volkswagen has reached a $15 billion civil settlement with environmental authorities and car owners in the U.S. under which it agreed to buy back up to 500,000 vehicles. The company also faces an investor lawsuit and criminal probe in Germany.

In all, some 11 million vehicles worldwide were equipped with the software.

The scandal was revealed in September 2015, when the U.S. Environmental Protection Agency issued a notice of violation. CEO Martin Winterkorn resigned and was replaced by Mueller. The company has apologized and brought in U.S. law firm Jones Day to investigate.

Oliver Schmidt, the company's former head of U.S. environmental compliance, was arrested over the weekend in Florida. Another employee, engineer James Liang, has pleaded guilty in the criminal case.

In a 2014 agreement with the U.S. Justice Department, Toyota agreed to pay a $1.2 billion fine over unintended acceleration problems. Similarly, General Motors agreed in 2015 to pay $900 million to resolve a deadly ignition-switch scandal, striking a deal with the Justice Department that avoided criminal charges against individual executives.

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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