Volkswagen has agreed to pay US vehicle owners an average of about $5,000 apiece to settle claims from its diesel emissions cheating scandal, two people briefed on the matter said on Thursday. The total price tag for the repayments and other fines is said to exceed $10.2bn.
The company will still have to settle foreign suits over allegations that it lied about its emissions standards, in addition to claims brought by other US agencies. The US justice department is conducting a separate criminal inquiry of the automaker, which could also result in a hefty fine.
Most of the money would go to compensate 482,000 owners of cars with 2-liter diesel engines that were programmed to turn on emissions controls during lab tests and turn them off while on the road, said the people, who asked not to be identified because a judge has issued a gag order in the case. The news was first reported by Associated Press and Bloomberg.
One of the people said the agreement was tentative and could change by the time the terms are officially announced by the judge. The bulk of the cash would be used to fix the cars, buy them back and compensate owners. Some funds would go to government agencies as penalties and for a program to remediate the environmental damage caused by pollution, the person said.
Carl Tobias, Williams Chair in law at the University of Richmond Law School in Virginia, said that Volkswagen would only have agreed to the deal if it believed the enormous sum was still less than ongoing lawsuits would cost the company.
“If you think about how many owners there are of these vehicles and you do that math, if you were to litigate each of them, it would be huge,” Tobias said. “Those kinds of expenses they’re going to avoid in the future. I saw something like 600 suits and some of them are class action.”
Similar suits across the country are being consolidated before San Francisco judge Charles Breyer. Tobias said he did not expect any official announcement of the deal before Tuesday, when the parties in the case are set to appear before Breyer.
Owners would have a choice between selling their vehicles back to VW at the value before the scandal broke on 18 September 2015, or keeping the cars and letting the company repair them. Either way, they would also get $1,000 to $7,000 depending on their car’s age, with an average payment of $5,000, one of the people said.
The carmaker has set aside $16.2bn (£11bn) to deal with the scandal. It admitted last September that 11m diesel cars had been fitted with software that allowed them to cheat emissions tests. Volkswagen still faces a string of regulatory and legal cases around the world.
Attorneys representing owners, VW and government agencies including the Environmental Protection Agency have not yet agreed on the steps VW will take to repair the cars, the person said. Any fix would be expensive and would probably require a bigger catalytic converter or injection of the chemical urea into the exhaust to help neutralize the pollution.
The EPA has said the cars, which include many of VW’s most popular models, can give off more than 40 times the legal limit of nitrogen oxide, which can cause respiratory problems in humans.
On Wednesday. at the first annual meeting since the carmaker became embroiled in the emissions scandal, Volkswagen shareholders accused its executives of overseeing a shambles that has led to the carmaker’s first annual loss in 20 years and demanded changes to the management structure.
Ulrich Hocker, head of the German shareholder association DSW, said there had been a collective failure by the management board. “We are looking at a shambles,” he said.
The Associated Press contributed to this article.