Volkswagen AG confirmed on Tuesday it has negotiated a $4.3 billion draft settlement with U.S. regulators to resolve its diesel emissions troubles and plans to plead guilty to criminal misconduct.
The guilty plea is part of the civil and criminal deal as the automaker looks to restore its tarnished global brand. Volkswagen said with the addition of the fine, its diesel costs will exceed the nearly 18.2 billion euros ($19.2 billion) it has set aside to handle the problem. VW also said it will face oversight by an independent monitor over the next three years.
Reuters reported earlier the company’s supervisory board is set to meet on Wednesday to approve a civil and criminal settlement with the U.S. Justice Department over the automaker’s diesel emissions. VW said the supervisory board and the management board would meet Tuesday or possibly Wednesday to approve the deal.
VW is expected to plead guilty as part of the settlement as early as Wednesday, a source familiar with matter said. The plea deal will need the approval of a U.S. judge.
Evercore ISI said in a research note it believes the “settlement is intended to draw a line under all remaining U.S. related legal risk. This is good news.”
VW had raced to get a deal done before President Barack Obama leaves office on Jan. 20. A change in administration could have delayed a final settlement for months if not longer.
“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 U.S. administration,” Evercore ISI said.
VW admitted in September 2015 to installing secret software in hundreds of thousands of U.S. diesel cars to cheat exhaust emissions tests and make them appear cleaner than they were on the road, and that as many as 11 million vehicles could have similar software installed worldwide.
On Monday, a VW executive, Oliver Schmidt, the second VW employee charged by U.S. prosecutors, was accused of conspiracy to defraud the United States over the company’s emissions cheating and the automaker was accused of concealing the cheating from regulators.
The Justice Department settlement with VW will not end the Justice Department’s investigation into individual misconduct and more executives may face charges, sources said.
VW still must spend the next two years buying back or fixing dirty U.S. vehicles and faces unresolved lawsuits from U.S. investors and about 20 U.S. 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 $1.2 billion and $900 million, respectively, but were not required to plead guilty.
VW warned in a financial disclosure the impact of the U.S. settlement on 2016 group results cannot be quantified yet, citing “various further factors.”
VW said in late October it expected the group operating margin to come in at the upper end of a 5 to 6 percent target range before one-off items, compared with 6 percent in 2015.
The carmaker is due to announce 2016 results on March 14.
Separately, Porsche SE, the main shareholder of VW, issued a profit warning after the VW news.
The settlement on U.S. criminal and civil fines will negatively affect Porsche SE’s results for 2016, the company said, adding it is possible the net result may drop below the previously reported range of 1.4-2.4 billion euros.
Volkswagen had previously agreed to spend up to $17.5 billion in the United States to resolve claims by U.S. regulators, owners and dealers and offered to buy back nearly 500,000 polluting vehicles.
Much of the company’s senior management departed following the scandal, including chief executive Martin Winterkorn.
VW Group said on Tuesday it had record sales in 2016 of 10.3 million vehicles, including a 12 percent increase in December. That figure should put VW ahead of Japanese rival Toyota Motor as the world’s largest car producer by volume for the year.
On Monday, VW shares rose 4.2 percent to their highest since September 2015 on optimism about the expected U.S. criminal settlement, topping the German blue-chip DAX index. The shares are still 10 percent below pre-scandal levels.
VW shares closed up less than 0.2 percent in trading Tuesday in Frankfurt before the company’s announcement.
(Reporting by David Shepardson in Detroit, Andreas Cremer in Berlin and Ilona Wissenbach in frankfurt; Editing by Chizu Nomiyama, Jeffrey Benkoe and Bernard Orr)
Was this article valuable?
Here are more articles you may enjoy.