Huge $10.2bn VW payout to settle US dieselgate tipped [Update]

Volkswagen will pay owners of diesel cars with emissions test-cheating engines up to $7,000 compensation as part of a $10.2bn settlement scheme, insiders say of the ongoing legal suit. The deal, yet to be made public but details of which have leaked to the Associated Press today, will apparently see Volkswagen offer to buy back affected cars or, alternatively, repair them, in addition to the compensation amount.

The buy-back value would be set at the market rate before September 18th, 2015, the date the news of the emissions cheating broke, it's said.

Alternatively, owners of the cars will be able to keep the vehicles but with fixes by Volkswagen to address the difference in actual emissions of nitrogen oxide and what is legally permitted.

Approximately 482,000 vehicles from across the VW group have the 2.0-liter diesel engine at fault. Independent testing of the cars revealed that, while on the road they pumped out far greater amounts of emissions gases than are allowed – up to 35-40x the amount, in fact – when the vehicles suspected they were in testing conditions they switched into a "cheat mode" that artificially lowered the results.

As for the compensation, that amount will be on top of any buy-back amount or the cost of repairing the cars. Although yet to be confirmed publicly, it's said that the amounts will vary between $1,000 and $7,000 according to the age of the vehicle.

One insider suggested that the average compensation would be $5,000 per owner.

Some of the settlement money will be paid in penalties, meanwhile, as well as funding an environmental program intended to offset the greater-than-reported emissions.

Although it's a big chunk of cash for VW to hand out, the more arduous challenge may be figuring out a repair that not only satisfies the Environmental Protection Agency (EPA) and its regulations but doesn't unduly impact the driving performance of the cars themselves.

Exactly how that will work is yet to be decided, though one possibility is injecting urea from an onboard tank, something that has been criticized for lowering trunk volume among other drawbacks.

Meanwhile what VW plans to do for owners of cars with the affected engine outside of the US remains unclear; as the company pointed out in April, any agreement in US courts has no bearing on what drivers in Europe and elsewhere can expect.

Looking ahead, Volkswagen is hoping to shift the focus to electrification. The company announced plans to have thirty all-electric models on the road by 2025 across its brands, though has committed to independent testing of all its gas and diesel engines moving forward.

"We have therefore decided that emissions tests at our company will, as a general principle, be externally evaluated by independent third parties in future," CEO Matthias Müller said this week. "Real-world random testing of vehicle emissions behavior on the road will also be introduced. I strongly believe that our industry requires more transparency, courage and openness in dealing with this issue."

Update: "This settlement will provide substantial benefits to both consumers and the environment – providing car owners and lessees fair value for their vehicles, while also removing environmentally-harmful vehicles from the road," Elizabeth Cabraser, Court-appointed Lead Counsel for the Plaintiffs' Steering Committee in the case, said today in a statement. "We are pleased with the steady progress made thus far towards finalizing the agreement-in-principle, and plan to file formal settlement papers per the schedule set by the Court. Per the Court's confidentiality order, we will have no further comment on this process until formal settlement papers are filed."

While Cabraser confirmed that Volkswagen would offer to buy back affected 2.0-liter TDI vehicles or, at the owners request replace them, in addition to coughing up "to offset the environmental damage caused by the vehicles' emissions," she insisted that the actual figures involved will not be made public until the agreement is made final on June 28.

At that point, Volkswagen will commit to "provide substantial monetary compensation, above and beyond the buyback/repair program, to class members in exchange for the release of their legal claims" against the firm.

"The parties remain in discussions regarding an appropriate resolution for affected 3.0 liter TDI models," the statement continues.