A $15 bn settlement over Volkswagen's emissions cheating scandal has cleared a key hurdle, with a federal judge giving preliminary approval to a deal that includes an option for owners to have the carmaker buy back their vehicles.
Lawyers for Volkswagen owners sought approval from US District Court Judge Charles Breyer, who is overseeing consumer lawsuits and government allegations that the company's diesel engines cheated on US emissions tests.
The terms call for the German carmaker to spend up to $10 bn buying back or repairing about 475,000 Volkswagens and Audi vehicles with 2-litre diesel engines and paying their owners an additional $5,100 to $10,000 each. Details about the vehicle repairs have not been finalised.
The judge's decision allows lawyers to notify vehicle owners of the terms, including using a settlement website to determine how much compensation they would get. The owners could object and opt out, allowing them to pursue legal action against Volkswagen on their own.
Judge Breyer, who is expected to make a final decision in October, has kept close tabs on the negotiations and praised the efforts of lawyers and a court-appointed settlement master who helped broker the deal.
"I don't know that I need to make any grand observations about the settlement," he said. "It appears in your presentation today as it appeared when you filed your documents that an enormous effort has been devoted to achieving a series of goals."
The settlement also includes $2.7 bn for unspecified environmental mitigation and an additional $2 bn to promote zero-emissions vehicles. It does not cover about 85,000 more powerful Volkswagens and Audis with 3-litre engines also caught up in the emissions scandal.
Volkswagen has acknowledged that the cars were programmed to turn on emissions controls during government lab tests and turn them off while on the road. Investigators found that the cars emitted more than 40 times the legal limit of nitrogen oxide, which can cause respiratory problems.
The company still faces billions more dollars in fines and penalties and possible criminal charges.