Volkswagen has been ordered to pay up to $14.7 billion to repair the damage done by circumventing emissions laws and duping customers.
On Tuesday, the US Department of Justice (DoJ) said in a press release that Volkswagen has agreed to settlements which partially resolve the problem, but will hit the firm's bank balance hard.
In two settlements, one with the United States and the State of California and another with the US Federal Trade Commission (FTC), Volkswagen will spend billions "to settle allegations of cheating emissions tests and deceiving customers."
Since last year, the German automaker has been embroiled in a public emissions scandal and probe which has spread to courtrooms worldwide. Volkswagen allegedly equipped various diesel engines with "defeat devices" which made sure vehicles passed emissions tests in lab settings -- but did not while on the road.
As a result, the automaker was forced to recall millions of vehicles worldwide for repairs which are still ongoing, and now faces lawsuits by governments, regulators, dealerships and customers alike for the deception.
According to the US agency, Volkswagen will offer customers a buyback and lease termination for almost 500,000 diesel models with the years 2009 - 2015 sold or leased in the United States.
Customers who choose to return their vehicles rather than settle for fixes -- of which the waiting list is stacked up -- and can claim between $12,500 and $44,000 each, depending on the car's model, year, mileage and condition.
Affected vehicles include Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.
However, the buyback program might not cover the cost of the car for customers as value has plummeted. To protect customers from losing out, the FTC has also ordered that customers be given the option to have their loans forgiven and written off by the automaker.
If third-party loans had been taken out to cover the cost of a car, customers can claim up to 130 percent of the amount they are entitled under the buyback program to cover additional fees.
It is expected that compensation costs alone will reach over $10 billion.
Volkswagen has also been ordered to spend $4.7 billion mitigating the pollution caused by vehicles which circumvented emissions regulations and by investing in green technologies.
The agreements solve part of the case compiled against Volkswagen in the United States. The Environmental Protection Agency (EPA) and California Attorney General's Office and the California Air Resources Board (CARB)'s complaints under the Clean Air Act, as well as FTC rules on unfair advertising and duping customers through the sale of "clean diesel" cars are now resolved.
However, the automaker must still atone for civil cases and complaints concerning 3.0 liter diesel vehicles -- and the question of criminal liability still hangs in the air.
Deputy Attorney General Sally Yates commented:
"By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our environment.
"This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public's trust. And while this announcement is an important step forward, let me be clear, it is by no means the last. We will continue to follow the facts wherever they go."