A US federal judge has said Volkswagen has reached an agreement in principle to provide "substantial compensation" to the owners of about 80,000 3-litre polluting diesel vehicles, a key hurdle to resolve the German carmaker'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 Justice Breyer gives final approval of the settlement.
Some fixes for the 3-litre engines may not approved until 2018, Justice Breyer said.
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-litre 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-litre owners.
Volkswagen spokeswoman Jeannine Ginivan said the carmaker was pleased with the agreement in principle, but said details will remain confidential for now.
Justice Breyer said the final agreement must be filed with the court by 31 January, and he expects to hold a 14 February hearing to approve the deal.
The US Federal Trade Commission is also expected to back the deal, Justice Breyer said.
Volkswagen, the world's No 2 car manufacturer, 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.
Justice 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-litre engines, including an offer to buy back all of the cars.
VW lawyer Robert Giuffra said yesterday the carmaker has offered buybacks to nearly 200,000 customers and 104,000 have accepted the offer at a value of nearly $2 billion.
VW had agreed to pay $5,100 to $10,000 in compensation to each of the US 2-litre owners.
If the new settlement follows the pattern, it could add $400m to $800m to the 3-litre settlement.
But funds from a separate settlement with German car supplier Robert Bosch are expected to defray VW's compensation costs.
