Volkswagen agrees $10bn US emissions settlement

Volkswagen will pay owners of its polluting diesel cars up to $7,000 (€6,160) and agree to fund a grant program to offset air pollution, under a $10bn settlement being negotiated for submission to a federal judge next week, people familiar with the talks said.

VW will provide cash payments worth between $1,000 and $7,000, depending on the vehicle’s age and other factors, to compensate consumers, the people said.

All spoke on the condition they not be identified because US district judge Charles Breyer, who is supervising the settlement discussions, has imposed a gag order.

The environmental remediation programme is a key priority for regulators looking to undo the damage of 482,000 diesel cars that emit up to 40 times the permitted amounts of smog-forming nitrogen oxides.

VW isn’t expected to be able to repair all of the cars affected to the satisfaction of the US Environmental Protection Agency (EPA), which may result in buybacks or extra payments to the environmental fund.

The Wolfsburg, Germany-based carmaker has admitted that since 2009 it rigged cars to pass EPA and California air resources board emission tests.

VW, the American agencies, the US justice department, and attorneys representing affected consumers are scheduled to present a settlement agreement June 28.

The parties reached a tentative agreement in April though discussions on the details are still continuing and may change before being submitted, the people said.

Jeannine Ginivan, a spokeswoman for Volkswagen, and Nick Conger, from the EPA, declined to comment.

Car owners will be faced with complex calculations to figure out how much cash they might receive from Volkswagen, two of the people said, which could upset them and harm the carmaker’s relationship with buyers even further.

Regulators are looking at a small but popular diesel-emissions clean-up scheme as a model for a VW remediation fund, according to the people.

The diesel emissions reduction act (DERA) grant is funded by the EPA but partially administered by states with severe diesel pollution.

The DERA programme funded projects like retrofitting older diesel buses or scrapping and replacing fleets of diesel-powered drayage trucks at ports.

In the VW case, states will be allocated funds, but will have to submit projects for approval based on criteria laid out in the court agreement. The fund administrator will audit projects.

VW hasn’t had input into details regarding the remediation plan, the person said.

The cost of the settlement will exceed $10bn, a person familiar with the matter said. The deal is expected to include penalties for breaking US laws, money to buy back vehicles, to compensate consumers and to settle class-action claims.

The company also faces a Federal Trade Commission action for false advertising.