SAN FRANCISCO (CN) — Volkswagen on Thursday announced a tentative deal to compensate 652 U.S. dealerships that lost money in the company’s diesel emissions-cheating scandal.
The proposed deal, announced at hearing on Thursday, comes nearly two months after Volkswagen signed off on a $14.7 billion settlement with the United States, California and a nationwide class of consumers. The landmark settlement was tentatively approved last month.
The German automaker admitted in September 2015 that it installed defeat devices intended to give false readings during emissions tests in about 475,000 diesel-engine vehicles. The 2-liter diesel engine cars spewed up to 40 times the amount of pollution allowed under federal law.
Under its proposed settlement with dealers, Volkswagen will buy back unfixable, used diesel cars from dealers under the same terms that it agreed to repurchase vehicles from consumers in the landmark $14.7 billion deal.
Volkswagen will also compensate dealerships for losses in franchise value. Both sides are still negotiating the precise formula for those payouts.
“These 652 mostly small business owners were blindsided by the diesel emissions scandal and have seen the value of their businesses plummet,” said attorney Steve Berman, managing partner of Hagens Berman, which represents dealerships and consumers.
Berman said this agreement will allow those businesses to “recover and move forward, continuing to employ thousands of Americans.”
Citing anonymous sources, Reuters reported on Thursday that Volkswagen will spend $1.2 billion compensating dealers, but neither Volkswagen nor Hagens Berman would confirm that number.
In a statement, Volkswagen called the tentative agreement an important step in demonstrating its commitment to “make things right” for all those affected by the emissions cheating scandal.
“Our dealers are our partners and we value their ongoing loyalty and passion for the Volkswagen brand,” Hinrich J. Woebcken, CEO of Volkswagen’s North American region, said. “This agreement, when finalized, will strengthen the foundation for our future together and further emphasize our commitment both to our partners and the U.S. market.”
Both sides are expected to present specifics of the tentative deal at a hearing scheduled for Sept. 30.
Fix for 3-liter engine vehicles
During Thursday’s hearing, U.S. District Judge Charles Breyer also asked for an update on the automaker’s progress in devising a fix for nearly 85,000 cars with 3-liter engines.
Volkswagen attorney Robert Giuffra Jr. told the judge that the company believes it can fix the cars with software upgrades and equipment modifications to bring them up to the emissions standard at which they were initially certified.
Executive Assistant U.S. Attorney Joshua Van Eaton said the Environmental Protection Agency will need to verify that any proposed fix fully eradicates the excess emissions as promised.
Breyer set a date of Oct. 24 for Volkswagen to update the court on its proposal to fix the 3-liter diesel engine cars.
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