International Finance

Volkswagen to close $4.3 bn deal for penalties

This would resolve one of the last obstacles for the company in the US ahead of the inauguration of the new president

January 12, 2017: Volkswagen AG is closing in on a deal to pay $4.3 billion in criminal and civil penalties to settle a US probe into the rigging of diesel-powered cars to cheat emissions tests.

The agreement, which VW said on Tuesday will include a guilty plea, raises the cost of the scandal to more than $23 billion in the US and Canada, much above the $19.2 billion the carmaker had set aside to resolve the disputes.

The accord would resolve one of the last big obstacles for the company in the US ahead of the January 20 inauguration of President-elect Donald Trump. That will allow the carmaker to begin rebuilding its reputation and focus on plans for clean energy vehicles.

The carmaker said the US settlement would likely result in a further $3 billion provision in 2016 fourth quarter results, which will be treated as exceptional. The carmaker extended a €20 billion (about $21 billion) bridge loan facility through mid-2017 to provide an additional financial cushion and protect its credit rating. The company had net liquidity of €31.1 billion (about $33 billion) in the automotive division at the end of the third quarter.

VW still faces investor lawsuits in the US and in Germany, as well as consumer lawsuits and a criminal probe in Germany. The company didn’t say in its statement whether additional individuals would be charged or plead guilty. At least one employee is facing charges in the US and another has already pleaded guilty related to the scheme.

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