VW reaches deal to compensate U.S. dealers for polluting diesels

Volkswagen AG said on Thursday it reached a deal to pay its 650 U.S. dealers for their losses from the German automaker's diesel emissions scandal, and a judge ordered it to move quickly to decide whether to fix or buy back 85,000 luxury vehicles with polluting engines.

The automaker and a lawyer for VW dealers announced a tentative settlement at a court hearing in San Francisco. The amount of the settlement fund was not disclosed, but it is expected to be significant, a person briefed on the matter said.

VW's U.S. dealers have been barred from selling polluting diesel vehicles for nearly a year.

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The agreement in principle must still be approved by the court. Under the settlement, Volkswagen agreed to repurchase unfixable, used diesel vehicles on dealers' lots under the identical terms that such cars must be repurchased from consumers and independent dealers, said Steve W. Berman, a Seattle lawyer representing dealers at the hearing.

The deal would help "heal the wounds between Volkswagen and the dealers," who "like consumers, have been financially hurt here," he said. "They have cars on their lots they can't sell, their franchise value has gone done and they've invested millions in these Volkswagen franchises."

Cash payments

Volkswagen said in a statement that it has agreed to make cash payments and provide additional benefits to dealers as part of the settlement.

VW had previously agreed to buy back 475,0000 vehicles equipped with 2.0-litre engines.

Judge Charles Breyer of the U.S. District Court, Northern District of California ordered Volkswagen and federal regulators to start settlement talks to resolve the fate of 85,000 3.0-litrediesel vehicles that could include a buy-back offer for those Porsche, Audi and Volkswagen vehicles.

Buying the expensive larger cars and SUVs sold since 2009 could cost VW billions of dollars.

Breyer set a Nov. 3 hearing for an update on the status of the talks and emphasized the urgency of resolving the issue. He said he wanted to ensure "a strong sense of reality" in finding a solution.

Plans for fix

VW must submit by late October its specific plans to fix the 3.0-litrevehicles, which it said include a mix of software upgrades and emissions equipment modifications.

Not all details of how the settlement fund will be divided among the dealers have been resolved. VW and the dealers told Breyer they plan to file details of the agreement by the end of September.

The German automaker has been taking a number of steps to resolve outstanding issues related to the emissions scandal.

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VW has admitted it installed improper software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide. In June, it agreed to pay up to $15.3 billion to buy back up to 475,000 vehicles and address claims by federal regulators and 44 U.S. states.

The U.S. Justice Department and Environmental Protection Agency have not yet reached a deal with Volkswagen on fines as part of a separate settlement that could lead to an outside monitor overseeing VW's compliance with American laws.