Volkswagen AG (ADR) (OTCMKTS:VLKAY) Is Holding Discussions To Create Two Funds


Volkswagen AG (ADR) (OTCMKTS:VLKAY) is said to be discussing with regulators in the United States to create two funds to settle the pollution payment issue. One is a national remediation fund while the other is meant for California as a pollution fine. The company admitted last year that it cheated on diesel-emission tests. The agreement should enable the German automaker to settle the lawsuit filed by the Justice Department.

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Promoting Clean Transportation

Volkswagen’s proposal involves a fund to be managed by the Environmental Protection Agency. Such a fund would be used to promote and encourage clean transportation in the United States. The other fund would be managed by California to encourage zero-emission vehicles there. Bloomberg reported that negotiations were still continuing as several details were fluctuating. The amount of the two funds was yet to be identified even as the company was facing a hefty fine apart from legal fees.

The German auto firm faced a court deadline of March 24 in California to offer a solution for 600,000 cars that polluted more than the permissible limits. The scandal affected about eleven million vehicles of different brands throughout the world. The parties involved in the negotiations did not comment on reports of the negotiations.

Estimated Penalties

Volkswagen faces a penalty of up to $46 billion for the four violations. However, the company appears to be involved in negotiations to reduce the penalties and reach a deal that is manageable. Also, a settlement might add $7.4 billion, which the company has already set aside for the scandal. That included the 8.5 million vehicles that need repair in Europe.

As far as the Department of Justice is concerned, it was treating Volkswagen in the same way it treated BP plc (ADR) (NYSE:BP) following the oil spin in 2010. While the government coordinated with the private plaintiffs in respect of the British firm, it has aligned with consumer suits with regard to the German automobile company. The government has also been investigating whether the company or its executives were involved in violating laws.

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