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VW to 'Generously Compensate' 600,000 U.S. Diesel Vehicle Owners

On Friday, Volkswagen (VW) postponed the publication of its 2015 results and delayed its annual shareholders' meeting “due to remaining open questions and the resulting valuation calculations relating to the diesel emissions issue.” Despite the uncertainty about the financial fallout of the scandal, the head of its claims fund said that the company will offer “generous compensation packages” to the roughly 600,000 U.S.

By Hannah Furlong | Published 9 years ago | About a 3 minute read

On Friday, Volkswagen (VW) postponed the publication of its 2015 results and delayed its annual shareholders' meeting “due to remaining open questions and the resulting valuation calculations relating to the diesel emissions issue.” Despite the uncertainty about the financial fallout of the scandal, the head of its claims fund said that the company will offer “generous compensation packages” to the roughly 600,000 U.S. owners of diesel vehicles whose emissions are over the legal limit.

Kenneth Feinberg was hired by VW in December to establish an alternative dispute resolution program for the affected VW owners. He previously headed the compensation funds for the Sept. 11, 2001 attacks, BP's Deepwater Horizon oil spill and General Motors' (GM’s) ignition switch crashes. Feinberg’s work for GM cost the company nearly $595 million, but settled 399 claims, avoiding costly and drawn-out legal battles.

VW remains undecided on whether vehicle owners will be offered cash, car buy-backs, repairs or replacement cars, but Feinberg told German paper Frankfurter Allgemeine that he expects an overwhelming majority of the owners to accept the eventual offer. VW has given him authority to set the level of compensation, although he says they have not discussed if there is a financial limit.

“If I were an individual VW car owner, I would look seriously at what Feinberg offers in this case,” said John C. Coffee Jr., a Columbia University law professor and an expert on civil actions involving numerous plaintiffs. “A Ken Feinberg cash plan, or Ken Feinberg new-vehicle plan, will be better than paying lawyers for a nominal cash award and some coupons from Volkswagen.”

It has been more than four months since the scandal broke in the U.S. and VW has not yet won approval to fix any of the vehicles from U.S. regulators. In turn, this is causing a delay in setting up a claims fund. “My hands are tied as long as VW and the authorities have not overcome their differences,” Feinberg said.

Reuters reports that VW has already promised goodwill packages worth $1,000 to tens of thousands of VW owners in the United States, and that European lawmakers have encouraged the company to consider a similar offer for European customers. VW set aside €6.7 billion ($7.5 billion) in the third quarter of 2015 to cover vehicle repair costs worldwide. The company will likely need even more, especially if it is required to carry out a large number of costly buy-backs.

Feinberg remains optimistic that he can settle the case, saying, “Look at my prior cases: 97 percent of the victims of Sept. 11 accepted my offer. At GM and BP it was more than 90 percent, too. That has to be my target for VW.”

“It is a purely business transaction, less emotional,” he added. “I see that from emails I get from vehicle owners, who say things like: 'Mr. Feinberg, I know I haven't lost a relative, I just want to be treated fairly.' They are all quite reasonable.”

The scandal’s full effects on VW’s sustainability efforts, and more broadly, consumers’ trust and the corporate responsibility movement, are yet to be seen.