Motor Mouth: How VW’s Diesel Settlement Will Impact You

Well, now that we have our hands on the details of Volkswagen’s class-action settlement, we at least know why it took so long to work out. Due to be confirmed early next week — the 26th, to be exact — it’s a complicated affair that has to take into account no less than six years of production, 45 models and countless options. We also know enough to say that it is an agreement that owners of 2009 to 2015 Jettas, 2012 to 2015 Passats, 2013 to 2015 Beetles and 2010 to 2015 Golf TDIs — not to mention 2010 to 2015 Audi A3s — should give thanks for. The American Environmental Protection Agency (EPA) and California’s Air Resources Board (CARB) have really held Volkswagen’s feet — or, should we say, catalytic converters — to the fire. Here, then, is a comprehensive explanation of what American TDI owners are going to receive as compensation and, more importantly for Driving readers, what we Canadians might expect for our future settlement:

How much money are we talkin’ about, anyway?

Well, there have been some pretty humongous numbers bandied about, the most notable being $14.7 billion (all figures are in U.S. dollars). But that includes the $2.7 billion for an “environmental remediation” trust and a further $2 billion in Zero Emissions Technology Volkswagen will have to spend as punishment for the fact that even the rejigged TDIs still won’t meet emissions standards. The real cost of eliminating all those nitrogen oxide-spewing TDIs is pegged at $10,033,000,000 (ain’t that a boatload of zeroes).

Even more specifically, that gargantuan number “was calculated based on an assumed 100 per cent buyback of purchased eligible vehicles and 100 per cent lease termination of leased eligible vehicles.” In other words, it will cost Volkswagen US$10 billion and change to buy back every one of the TDIs confirmed to have the NOx-spewing defeat device, of which there are approximately 480,000 in the United States. That works out to about $20,900 for each and every car, a huge sum of money considering these are, let us not forget, used cars.

How did they arrive at this figure?

There are actually two parts to the compensation Volkswagen is offering. And, if that’s not complicated enough, those two parts are divided into two choices, either an offer to buy the afflicted TDI back or to refurbish it so that it would then comply with current emissions standards.

Let’s look first at what you’ll get if you give your car back to VW

Again, there are two parts to the compensation being offered if you choose to return your emissions-violating TDI. The first part is buying back your used Golf, Jetta, Beetle or Passat. In other words, its resale value. The amount you will receive is determined by the “clean trade” value — set by the National Automobile’s Dealers Association (NADA) — on September 18, 2015. That’s the day the EPA dropped its defeat device bombshell that sent TDI values into a tailspin. The one exception to this rule is for 2015 models because, on Sept. 18, 2015, these were still considered “new” cars and there were no resale values yet published. Therefore, Volkswagen has determined that 2015 TDI owners will be paid precisely 71.7 per cent of their initial purchase price as the buyback. Either way, the intention is the same; to give you the resale value of your car before the defeat device scandal came to light.

The second part of the monies you’ll get is something called an “owner restitution payment,” basically the EPA’s “Bailiff, whack his pee-pee” penalty for Volkswagen cheating on its emissions standards and, more importantly, embarrassing it in public. It is important to note that no matter what you decide — whether you give back the car or choose to have it fixed — you will receive this compensation. The amount of this penalty is exactly the same whether you give the car back to Volkswagen or choose to have it fixed. Note again that the $20,900 average payout noted above is a combination of the resale value and the owner restitution penalty.

Environmental Protection Agency (EPA) administrator Gina McCarthy speaks alongside Deputy Attorney General Sally Yates (L) during a press conference to announce environmental and consumer relief in the Volkswagen litigation at the Department of Justice in Washington, DC, on June 28.

Okay, how is this “owner restitution payment” thingie determined?

This restitution is based on a complicated formula that basically adds a further 20 per cent of the vehicle’s resale value (again, as of Sept. 18, 2015) and a further penalty of $2,986.73. Don’t ask me how they came to that exact number; it’s just one of the seemingly arbitrary numbers littering this agreement. To complicate this just a little further, Volkswagen has put a floor on this penalty of $5,100. If the total of the 20 per cent of resale value and $2,986.73 is less than $5,100 — in effect, the models that fall in this category are older 2009 and 2010 Jettas — Volkswagen will top up the total to reach that minimum of $5,100. No one gets less than a $5,100 “bonus:” Most people get more. And to reiterate, even if you choose to keep your TDI, you are eligible for this owner restitution payment.

What if my car was leased instead of owned?

If you’re leasing a 2009 to 2015 VW — or an Audi A3 — you are eligible for a complete payout of your lease without penalty and half of the owner restitution payment. More specifically, you’ll get 10 per cent of the car’s value and $1,529.005 (you know some lawyer was probably compensated $600 an hour to make sure that extra half penny was in there). According to the current information, the minimum restitution payment — for a 2011 Jetta — is $2,634; the maximum is $4,052 for a fully-loaded 2015 Beetle Convertible. Note that even if you have returned your VW at the end of its lease — as long as it was after Sept. 18, 2015 — you are eligible for this compensation.

What if I sold my car or it got destroyed in an accident?

If you sold your TDI after Sept. 18, 2015, but before June 28, 2016, the restitution payment is split evenly between the previous owner and the new buyer. In other words, both are eligible for exactly half of the owner’s restitution: 10 per cent of the car’s value when you sold it plus $1,493.365 (again with the half penny) with a minimum of $2,550.

Even if you totalled the car — after Sept. 18, 2015, of course — you are still eligible for the full owner restitution. In fact, there are so many mouse clauses covering all manner of oddball cases that there’s simply too many examples to list. Starting July 26th, you’ll be able to go to www.VWCourtSettlement.com, enter your VIN number and find the exact buyback and restitution payments your car is eligible for.

Volkswagen CEO Matthias Mueller attends the annual shareholder meeting in Hannover, Germany, Wednesday, June 22.

So, Dave, what should I do? Should I get my TDI refurbished or just take the money and run?

As I mentioned, the average compensation — including the buyback and the penalty — is about $20,900. That’s the average for the entire fleet — everything from 2009 Jetta TDIs valued at just $12,475 to the $33,835 being offered for a top-of-the-line 2015 Beetle Convertible TDI (you’ll get as much as $44,176 for a 2015 Audi A3 Prestige).

When you look at the individual compensation packages, it becomes clear that the best deal is to take the buyback. For instance, if you turn in a 2014 Passat TDI SEL, you will receive, depending on the options (yes, they’ve figured that out to the cent as well), between $28,847 and $28,967. A brand new Passat SEL, complete with a way cool Fender audio system and VW’s improved 1.8-litre (gasoline-fueled) turbo, goes for $30,495 (again, all numbers are in U.S. dollars). Anytime you can trade in a two-year-old vehicle for an equivalent brand spanking new one (albeit, minus the fuel-sipping diesel engine) is a good day. If you currently own a 2015 Passat TDI SEL, you’ll actually make money on the comparison because VW is forced to pony up $32,747 to $32,867 as compensation.

Even if your car is older, the best bet is still to take the buyout. A 2012 Jetta sedan will net you $18,317 to $20,867. The 2016 model starts at $17,680 and even a well-equipped Jetta 1.8 T Sport is only $20,895. Hell, if they’re going to give you $15,500 to $17,447 for a six-year-old Golf 4-door Hatchback when new ones start at $20,175, keeping the NOx-spewing diesel just doesn’t make any sense.

What if I don’t take the buyback?

If you opt to keep your TDI, things get even more complicated. For one thing, Volkswagen and the EPA have not agreed to a fix yet and there’s no indication as to what might actually be involved in retrofitting the errant turbodiesels. Will it affect performance? Will it affect fuel economy? No one knows.

And, no, you can’t opt for the fix, see if you like how your car performs after the modification and then decide to sell it back to Volkswagen.

When will the work be completed?

It’s doubtful any cars will be worked on before 2017. And Volkswagen has until June 30, 2019, to complete 85 per cent of the recall (or else it gets fined). In other words, it could be almost three years before they get around to your car.

Worse yet, some cars — essentially, all the 2015s — need a two-step procedure to fix their emissions, meaning owners will have to go to the shop twice to eliminate their tailpipe’s errant toxins. If you do choose to get your 2015 TDI fixed, you will get two-thirds of your compensation on the first visit and the remaining third — and a free oil change and filter! — when the work is completed.

Will my TDI now meet emissions standards?

Surprisingly, the answer is still no. According to Bloomberg, while your TDI will no longer be spewing out 40 times as much nitrogen oxides as allowed, as it did when the defeat device was working, it will still be emitting twice as much NOx as current standards permit. That’s because an “AdBlue” system — that injects urea into the engine — was deemed too expensive to retrofit and there’s just so much a software remap can do without significantly affecting performance. All you “clean diesel greenies,” take note.

What does this mean for Canadian TDI owners?

Well, as of this writing, no details have been offered as to the compensation that will be offered to Canadian diesel owners. Officially, Volkswagen Canada’s position is that “class action proceedings in Canada follow their own process within Canadian courts and therefore the process differs from that in the United States,” and that “only…the repairs for the affected vehicles” that “are subject to approval by the U.S. Environmental Protection Agency” will be offered here.

That said, unlike European TDI owners — VW is so far rejecting calls for European owners to receive the same compensation as American customers — we Canadians should expect the same basic compensation package. If that indeed proves true, my advice as to which option to take remains the same. If the agreement differs from that offered to American TDI owners, you should raise holy hell with Volkswagen Canada.

What happens if all Volkswagen owners turn in their TDIs?

Oh, isn’t that the $64-billion dollar question? In all, it would mean Volkswagen would have to dispense with about 600,000 — America’s 480,000 and Canada’s 107,000, but not including all the 3.0-litre V6 TDIs that this settlement does not cover — non-emissions compliant 2.0-litre TDI-powered cars. As part of this settlement, Volkswagen agrees to not sell any of these cars in the U.S. or abroad until they have been made emissions compliant. So, they’re still on the hook for fixing them.

As we go to press, the unresolved question is whether, if VW wants to sell them abroad, the automaker will have to make the retrofitted cars EPA-compliant or just meet the regulations of the export country? Since North American emissions standards are the toughest in the world, if the cars need to be returned to EPA compliance before they can be exported, the expense might not make it worthwhile.

So, what will Volkswagen do if they can’t sell the returned cars, either domestically or abroad?

Again, no one knows. 600,000 Volkswagen TDIs without a home is the automotive equivalent of the Syrian refugee crisis. There’s just no precedent on how to proceed.

One suggestion that’s been made is for Volkswagen to donate cars to vocational schools. Even if they did that, however, at a rate of two per school, that still leaves more than half a million TDI-powered Golfs and Passats clogging up automotive graveyards. The best suggestion so far would be for Volkswagen to strip all the cars for spare parts and set up its own certified used parts program; though it would be complicated, it would at least allow the company to recoup some of the $10 billion it has set aside to buy back all these soon-to-be-abandoned oil burners.

Sadly, then, the most likely result is that they will all get crushed. As I said, there’s no precedent to a “recall” as vast as this.

One last number to think about

There’s one more number that you need to know about the Dieselgate scandal. And it’s a very simple one. With all this talk of billions of dollars penalized, hundreds of thousands cars scrapped and countless owners demoralized, inconvenienced and infuriated, the most important number is …

One.

That’s roughly the number of years of profit that US$14.7-billion penalty represents (according to the Wall Street Journal, Volkswagen AG made US$12.3 billion in profits in 2014). In other words, Volkswagen gets out from underneath the biggest scandal in the 130 years of automobile production by forgoing its profit for one measly year. Suddenly, those other huge numbers don’t seem quite so onerous.

Source: driving.ca driving.ca

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