SAN FRANCISCO (CN) – A federal judge on Tuesday tentatively approved a deal worth at least $1.2 billion to settle claims over 78,000 three-liter diesel-engine Volkswagens, Audis and Porches that were designed to cheat emissions tests.
The tentative approval marks the latest chapter in the ongoing fallout over Volkswagen’s use of emissions-cheating software in some 11 million vehicles worldwide. The “defeat device” kicks in during emissions tests while allowing vehicles to spew up to 40 times more pollution on the road than permitted under U.S. regulations.
On Tuesday, U.S. District Judge Charles Breyer also tentatively approved a separate $327.5 million settlement with German auto parts supplier Robert Bosch GmbH, which allegedly helped design the software that enabled vehicles to deceive regulators.
The scandal has cost the German automaker more than $20 billion in U.S. civil settlements and criminal fines thus far.
This most recent settlement could set Volkswagen back by up to $4 billion if it can’t come up with regulator-approved, emissions-reducing repairs for 58,000 newer-model vehicles, but Breyer said he favors a deal that gives Volkswagen a chance to bring some of its affected vehicles into compliance with federal air quality standards.
“Some people will say just do a buyback,” Breyer said. “You have to ask is that environmentally responsible? If these cars can be brought back to what a consumer expected in terms of performance, is it environmentally sound to waste money, assets, material, time – all of those things – that led us up to where we are today? Does that make sense? In the court’s view, it doesn’t.”
Under terms of the deal approved Tuesday, Volkswagen will offer to buy back about 19,000 older-model “generation 1” vehicles with three-liter diesel engines for which it cannot come up with an approved modification to reduce emissions.
The “generation 1” vehicles include the 2009 through 2012 Volkswagen Touareg and Audi Q7 diesel models.
Volkswagen will repurchase those vehicles at the price at which they were valued in September 2015 before the scandal was exposed. The automaker will also compensate owners with at least $6,000 in restitution and up to 30 percent of their buyback amount in loan forgiveness.
Volkswagen will spend nearly $800 million buying back the “generation 1” vehicles and $6 million providing extended warranties and service refunds, class attorneys said Tuesday.
For 58,000 “generation 2” vehicles, Volkswagen must provide regulator-approved, emissions-reducing repairs for three sub-classes of vehicles by deadlines in October, November and December this year.
The automaker can opt for a 30-day extension of those deadline up to 90 days, but if it does, it must also pay fines of $500 per vehicle for each extension, with additional penalties that will raise the settlement value to $4.2 billion.
The “generation 2” vehicles include the 2013-2016 Volkswagen Touareg, 2013-2015 Audi Q7, 2013-2016 Porsche Cayenne and 2014-2016 Audi A6 Quattro, A7 Quattro, A8, A8L and Q5 models.
The automaker will also compensate owners of those newer-model vehicles with payments ranging from $7,039 to $16,114. Those who leased “generation 2” vehicles are eligible for $2,000 payments as well.
To qualify for the class, one must have owned or leased one of the affected vehicles on or after Sept. 18, 2015, the date the U.S. Environmental Protection Agency first revealed the scandal.
The three-liter diesel settlement also includes $225 million to mitigate environmental harm caused by excess nitrogen oxide emissions. That will be added to $2.7 million in environmental mitigation that was pledged in a previous settlement.
Volkswagen attorney Robert Giuffra said in a statement Tuesday that the three-liter diesel settlement “marks an important milestone in Volkswagen’s efforts to make things right in the U.S.” and “builds on the progress Volkswagen has been making with the previous settlement.”
In October, Breyer finalized a $14.7 billion deal to settle claims over some 500,000 two-liter diesel engine vehicles tainted by emissions-cheating software.
On Tuesday, Volkswagen attorneys said more than 360,000 claims for buybacks, repairs or lease terminations for the two-liter diesels vehicles were filed, and that 125,000 claims have already been processed and completed.
Last month, the Department of Justice announced it was seeking criminal charges against six Volkswagen executives, and Volkswagen agreed to pay $4.3 billion in criminal penalties for conspiracy to defraud the U.S. and obstruction of justice.
The deadline to object to or opt out of the three-liter diesel engine and Bosch settlements is April 14, 2017.
A final approval hearing for the settlements is scheduled for May 11.