German car giant Volkswagen has agreed to pay at least $1.2 billion to fix or buy back 78,000 diesel cars in the United States to settle more emissions-cheating claims.
Without regulatory approval, VW could be forced to buy back all of the cars, costing it about $4 billion.
The deal, another in its long-running emissions scandal, still needs approval from the courts.
Car components company Robert Bosch GmbH, a VW supplier, has also agreed to pay $327.5 million to US owners of affected cars.
The proposed settlements for the 3-liter cars are the last major US hurdle for VW over its emissions scandal.
VW previously agreed to spend up to $10 billion to compensate the owners of about 482,000 2-liter vehicles after it admitted it had installed secret software to disguise emissions.
On February 1, the Federal Trade Commission (FTC) said that US customers who bought the 3-liter diesel cars would be fully compensated “through a combination of repairs, additional monetary compensation, and buybacks for certain models”.
Owners of 2009 to 2012 models could get between $26,000 to $58,000 for a buyback, depending on the model, mileage, and trim of the car, the FTC said.
For owners and people leasing 2013 to 2016 models, VW is expected to get regulatory approval for a fix that makes the cars compliant with US environmental regulations, the FTC added.
However, if VW fails to get EPA and the California Air Resources Board approval for the modification within a certain time frame, it must offer to buy back those vehicles, upping the amount it has to pay to about $4 billion.
Volkswagen has reached a deal with the US authorities under which the automaker could offer to buy back up to 500,000 diesel cars in the US.
VW has also agreed a compensation fund for owners.
The German car giant is expected to reveal the deal to a Federal judge in San Francisco on April 21.
A VW spokeswoman, the Environmental Protection Agency (EPA) and the Justice Department declined to comment.
The company could also offer to repair diesel vehicles if US regulators approve a fix at a future date, reports said.
In March, US District Judge Charles Breyer gave VW until April 21 “to announce a concrete proposal for getting the polluting vehicles off the road.”
Judge Charles Breyer said in March the “proposal may include a vehicle buy back plan or a fix approved by the relevant regulators that allows the cars to remain on the road with certain modifications.”
In September 2015, the EPA found that VW cars being sold in the US had a “defeat device” – or software – in diesel engines that could detect when they were being tested, and change the performance to improve results.
Some models could be pumping out up to 40 times the legal limit of the pollutant nitrogen oxide.
In March, VW CEO Matthias Muller said that a deal with US authorities over its emissions scandal could take longer and cost more than expected.
Matthias Muller warned that the €6.7 billion set aside to cover the costs of the scandal might not be enough.
Volkswagen has apologized after US regulators found some of its cars disguised pollution levels.
VW CEO Martin Winterkorn said: “I personally am deeply sorry that we have broken the trust of our customers and the public.”
He has launched an investigation into the device that allowed VW cars to emit less during tests than they would while driving normally.
The German automaker’s shares were down 19% in Frankfurt by lunchtime.
Volkswagen was ordered to recall half a million cars on September 18.
The Environmental Protection Agency (EPA) found the “defeat device” in diesel cars including the Audi A3, VW Jetta, Beetle, Golf and Passat models.
In addition to paying for the recall, VW faces fines that could add up to billions of dollars. There may also be criminal charges for VW executives.
The EPA said that the fine for each vehicle that did not comply with federal clean air rules would be up to $37,500. With 482,000 cars sold since 2008 involved in the allegations, it means the fines could reach $18 billion.
That would be a considerable amount, even for the company that recently overtook Toyota to be the world’s top-selling vehicle maker in the first six months of the year. Its stock market value is about €66 billion ($75 billion).
The company has stopped selling the relevant diesel models in the US, where diesel cars account for about a quarter of sales.
It has ordered an external investigation, although it has not revealed who will be conducting it.
“We do not and will not tolerate violations of any kind of our internal rules or of the law,” Martin Winterkorn said.
The German government said on September 21 it would rely on the US authorities to assess whether VW had done anything wrong in Europe.
“We expect the car companies to pass on reliable information so that the Federal Motor Transport Authority, the responsible authority in this case, can investigate whether similar manipulations took place with the emissions systems in Germany and Europe,” a spokesman for the German environment ministry said.
The scandal comes five months after former chairman Ferdinand Piech left Volkswagen following disagreements with Martin Winterkorn.
The VW board is due to meet on September 25 to decide whether to renew the chief executive’s contract until 2018.
“This disaster is beyond all expectations,” Ferdinand Dudenhoeffer, head of the Center of Automotive Research at the University of Duisburg-Essen, said.
VW had been promoting its diesel cars in the US as being better for the environment.
The US law firm Hagens Berman is launching a class-action suit against VW on behalf of people who bought the relevant cars.
The models cited by Hagens Berman are the diesel versions in the US of:
Jetta (2009 – 2015)
Beetle (2009 – 2015)
Audi A3 (2009 – 2015)
Golf (2009 – 2015)
Passat (2014 – 2015)
“While Volkswagen tells consumers that its diesel cars meet California emissions standards, vehicle owners are duped into paying for vehicles that do not meet this standard and unknowingly pay more for quality they never receive,” Hagens Berman alleged.
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