 "Volkswagen")
It was one of the fastest civil settlements in the history of corporate malfeasance, coming together in six months instead of the years usually required for such complex negotiations. But the path to Volkswagen's $15 billion deal last month with American officials and car owners over the company's diesel deception was fraught with pitfalls, including clashing egos and cultures, arguments over mathematical formulas and frayed nerves from late nights and lost weekends.
The negotiations, which began in January, threatened to unravel in March. Fixing half a million cars to comply with clean air rules looked increasingly impossible. And Volkswagen was balking at any plan to buy back and scrap every car, which the company said it believed would be exorbitantly expensive.
Looking to negotiate the differences, a group of Volkswagen executives and lawyers, led by Francisco Javier Garcia Sanz, a VW board member, headed to Washington to meet with officials at the Justice Department. The company proposed fixing the cars as best it could, while reducing emissions in other ways, like installing cleaner engines in government trucks, buses and tugboats.
Government officials pushed back, said the people, who spoke on the condition of anonymity, citing the continuing legal action. The officials would agree to a partial fix, but Volkswagen would have to offer to buy back the cars, even if every owner took that option.
The breakthrough compromise led to the $15 billion deal with federal and state governments, and with plaintiffs' lawyers to compensate car owners and help repair the environment. The settlement, though painful to Volkswagen, could easily have taken much longer and cost billions of dollars more, based on a review of court documents and interviews with parties on both sides.
But a quick settlement was in the interest of both Volkswagen and the government.
Volkswagen was dealing with the corrosion of its brand, as the scandalweighed on its profitability. While the settlement would do nothing to address the threat of stepped-up criminal investigations and shareholder lawsuits, a settlement in the United States civil case would eliminate one of the biggest sources of financial risk.
Lawyers for the government wanted to get the polluting cars fixed or off the road. An extra push came from Judge Charles R Breyer of Federal District Court in San Francisco.
"How do we fix what was done?" Judge Breyer said during the session on January 21. "If it can't be fixed, then what is fair and just compensation for the people who have been damaged by this matter?"
Judge Breyer gave the lawyers tight deadlines. He set an example by deciding on members of the plaintiffs steering committee just hours after the court session ended.
Volkswagen was in a weak position as the talks got underway.
Despite its weak position, Volkswagen won some important concessions, like not having to bring all the diesels into full compliance with air-quality rules. Government officials realised, the negotiators said, that some customers would want to keep their cars and that there needed to be a solution that reduced pollution as much as possible.
The compromise also cut the potential cost to Volkswagen. It could save billions if many customers opted for repairs.
Instead, the company will pay $2.7 billion into a fund overseen by a court-appointed trustee that will be used for projects to reduce nitrogen oxides. Volkswagen will also invest $2 billion to build charging stations and other projects to promote the use of electric vehicles. About $1 billion will go to California, which has the largest number of Volkswagen diesels.
In the final days before the June settlement deadline set by Judge Breyer, negotiators gathered at the Washington offices of Sullivan & Cromwell, which represented Volkswagen, at a large conference room overlooking the Jefferson Memorial.
One of the last issues was to get state attorneys general, who had sued separately, to sign on to the deal, according to three participants in the discussions. Negotiations with Texas, a crucial state because it accounted for 43,000 of the affected vehicles, continued until around midnight on June 27, just hours before the settlement was due.
© 2016 The New York Times News Service
