A federal judge said on Thursday that Volkswagen AG has reached an agreement in principle to provide "substantial compensation" to the owners of about 80,000 3.0 liter polluting diesel vehicles, a key hurdle to resolve the German automaker's emissions scandal.
US District Judge Charles Breyer did not disclose the amount of owner compensation, which is not included in a $1 billion settlement announced earlier this week between VW and US regulators. Half of the compensation will be paid at the time Judge Breyer gives final approval of the settlement.
Earlier this week, Volkswagen reached the $1 billion settlement with US regulators, offering to buy back about 20,000 of the vehicles, fix the remaining 60,000, and pay $225 million into an environmental trust fund to offset the vehicles' excess emissions.
The settlement covered luxury VW, Audi, and Porsche vehicles with 3.0-liter engines. With the agreement, Volkswagen would spend as much as $17.5 billion in the United States to resolve claims from owners as well as federal and state regulators over polluting diesel vehicles in addition to compensation for the 3.0-liter owners.
Volkswagen spokeswoman Jeannine Ginivan said the automaker was pleased with the agreement in principle on payments to owners, but said details will remain confidential for now.
VW has not sold any new diesel cars in the US since the September 2015, when the Environmental Protection Agency stopped sales due to evidence that VW's diesel vehicles were designed to cheat US emissions standards. Nor will the automaker sell diesel vehicles from the 2016 and 2017 model years, prompting doubts that it will ever resume diesel sales in the US.
The diesel market took a considerable hit in the months following the scandal. American diesel car sales, which once ranged from 4,800 and 9,500 per month across all manufacturers, dropped to just 225 by January 2016, The Christian Science Monitor's Rowena Lindsay reported in October.
Breyer said the final agreement must be filed with the court by Jan. 31, and he expected to hold a hearing to approve the deal in February.
Volkswagen, the world's No. 2 automaker, could still spend billions of dollars more to resolve a US Justice Department criminal investigation and federal and state environmental claims and come under oversight by a federal monitor.
It is possible a deal could be reached before the end of the Obama administration, said sources briefed on the matter.
Breyer in October approved VW's earlier settlement worth about $15 billion with regulators and the US owners of 475,000 polluting diesel vehicles with smaller 2.0-liter engines, including an offer to buy back all of the cars.