VW May Set Up Two Funds to Settle U.S. Diesel Cheating Scandal

Volkswagen AG is negotiating to create two remediation funds in the U.S. that would compensate for the environmental damage caused by diesels it rigged to evade emission standards, sources tell Bloomberg News.

VW has set aside €6.7 billion ($7.6 billion) to repair the 580,000 affected diesels in the U.S. and more than 10 million vehicles elsewhere. But the company faces theoretical maximum fines of $66 billion (€58 billion): $18 billion from the U.S. Environmental Protection Agency and $48 billion from a Dept. of Justice lawsuit.

Creating the two funds would be a way to satisfy government agencies while reducing the financial toll to a manageable level.

The scheme would set up one fund administered by EPA, which would use it to support various forms of “clean” transportation, according to the sources. They say a second fund controlled by California would promote sales of zero-emission vehicles in the state.

VW also would be required to fix and/or buy back the rigged diesels it sold in the U.S. California is pushing to allow any owner of an affected diesel to sell the vehicle back, even if it can be fixed, Bloomberg says.

Last week the head of the California Air Resources Board said the agency believes none of the 2.0-liter 4-cylinder diesels involved in the scandal can be brought into regulatory compliance. He did not comment on 3.0-liter V-6 diesels that regulators also have targeted for cheating.

Details about the funds are sketchy, and Bloomberg’s sources say both deals are far from being finalized. They say talks began many weeks ago but have gained traction only recently.