Volkswagen to buy back some of 600,000 cars that cheat emissions tests

Volkswagen, the US government and private lawyers have reached a deal for the automaker to buy back some of the nearly 600,000 diesel cars that cheat on emissions tests and spend just over $1bn to compensate owners, according to a person briefed on the matter.

The "deal in principle” includes a maximum amount of spending, but the final details, like how much each owner would get, are still being worked out, according to the person, who asked not to be identified because the deal has not been made public.

Some owners would get a choice of having VW repair their cars or buy them back, but that would vary by model year and engine type, the person said. The deal likely is part of a bigger payment package from VW. It does not yet include plans on how to repair the cars, the person said. The cars can spew out harmful nitrogen oxide at 40 times the allowable limit, the person said.

The agreement is likely to be announced on Thursday morning during a federal court hearing in San Francisco. The person says it will not include plans to fix the cars. Those plans, and the cost of the fixes, apparently are still under negotiation.

"They’ve agreed on a maximum amount of money, over $1bn” for compensation, said the person. "How it’s allocated and distributed, that remains to be seen.”

It means that owners probably won’t find out on Thursday how their cars will be fixed, nor will they know exactly how much they will get in compensation. With $1bn to spend, it works out to about $1,700 per car. But some owners of newer models who get just a software fix may receive little. About 325,000 owners of older cars that require more extensive repairs will probably get more, because the repairs could affect mileage and performance.

At the hearing, senior US district court judge Charles Breyer is also to discuss a schedule for depositions and information exchange between all sides in the case. He could even set a trial date if he is dissatisfied with the agreement.

Representatives for Volkswagen, the lawyers, and the government all declined comment on Wednesday. Wyn Hornbuckle, spokesman for the Department of Justice, which has sued Volkswagen, said federal officials would wait until Thursday’s hearing before speaking. John Gersten, a spokesman for a law firm representing hundreds of Volkswagen owners, said a confidentiality order barred the firm from making any comment.

The owners filed dozens of lawsuits against VW after it acknowledged in September that it intentionally defeated emissions tests and put dirty vehicles on the road. The cheating allowed cars to pass laboratory emissions tests while polluting on real roads.

Volkswagen told its shareholders last year it had set aside $7.3bn to help defray the potential costs of a recall or regulatory penalties. Most outside observers have said that figure is probably far too low. The company faces as much as $20bn in fines for Clean Air Act violations alone, before paying to fix the cars or compensate their owners.

Breyer has told the lawyers to come up with repair and compensation plans before Thursday’s hearing or face a trial. He wants to know the timing of any fixes and any planned payments to owners, among other details, by Thursday. It was unclear if the plans would satisfy the judge’s request.

Lawyers for the owners have said in court papers that if there is no deal, they want an expedited hearing or a trial before the judge to get an order for "equitable relief” that would begin in July. Or they want a full trial that would include punitive damages against VW in the same time frame.

Volkswagen says in documents that it does not believe a hearing or trial is appropriate, apparently because progress is being made toward a fix and compensation. A solution could be revealed at Thursday’s hearing.