Volkswagen is said to be close to announcing a deal to compensate U.S. owners of its scandal-afflicted diesel vehicles. Credit: Associated Press

SHARE

By ,

Volkswagen is said to be close to announcing a deal to compensate U.S. owners of its scandal-afflicted diesel vehicles, as the company approaches a critical federal court hearing Thursday morning without a publicly identified plan to fix those vehicles.

The company is expected to offer individual owners $5,000 apiece as compensation for having been sold cars that pollute more than is legally allowed, according to a report by German newspaper Die Welt.

The plan could help the embattled German automaker avoid a trial before U.S. District Court Judge Charles R. Breyer in San Francisco, who had set Thursday as a deadline for Volkswagen to deliver a fix involving vehicles that violate U.S. emissions standards.

Two Volkswagen officials declined to comment on the report.

Kelley Blue Book analysts recently projected that the cost of buying back all of the U.S. vehicles involved in the scandal, based on current value, would be $7.3 billion.

Former FBI director Robert Mueller, who was appointed to negotiate settlements with Volkswagen, told Breyer in March that settlement talks were progressing nicely.

Separately, Reuters reported that Volkswagen has also "reached the framework of a deal" to fix cars after EPA regulators rejected a repair plan submitted in January.

"It sounds like the kinds of things that the judge wanted to see, so maybe there's some progress," said Carl Tobias, a product liability law professor at the University of Richmond.

The EPA and California Air Resources Board exposed Volkswagen's illegal emissions software in September. More than half a million diesel cars and crossovers were rigged to cheat U.S. standards on harmful pollutants.

Breyer told Volkswagen lawyers in March that they had until April 21 "to announce a concrete proposal for getting the polluting vehicles off the road," according to a court transcript.

The plan, he said, "must be specific and detailed as to proposed timing, what cars are involved in each proposal, payments to consumers and the like."

Tobias said that if Volkswagen misses the deadline, Breyer may feel compelled to move ahead with a trial over Volkswagen's financial liability to consumers who were duped into buying cars marketed as "clean diesel" vehicles.

"At some point I think the judge will just lose patience and say, 'OK we have to do something now,'" Tobias said.

Representatives for the EPA and consumer plaintiffs declined to comment for this article. Breyer has instructed Mueller and the attorneys not to discuss their negotiations publicly.

Volkswagen is facing a torrent of legal challenges over its handling of the emissions crisis, which affects some 11 million vehicles worldwide and is expected to cost tens of billions of dollars in fines or settlements.

The Wall Street Journal and other publications reported Wednesday that Volkswagen expects to boost its reserve to at least $10 billion to resolve the emissions crisis.

The latest legal problem was a lawsuit from the U.S. Justice Department over what the Federal Trade Commission described as a false marketing scheme designed to trick customers into buying VW cars under the guise of the "clean diesel" advertising campaign.

With the EPA's threat of massive fines, the FTC's lawsuit, the Justice Department's criminal investigation and numerous consumer lawsuits, Volkswagen is facing tremendous pressure to cut deals.

But Tobias said Mueller could be positioned to strike a sweeping settlement to resolve the claims against the automaker.

"I think his role is to bring everybody together and try to craft a settlement, as big as possible and maybe encompassing everything. That sounds like a herculean task to me, given all the moving parts," Tobias said.

One potential solution for the vehicles — ranging from certain Volkswagen cars to Audi luxury vehicles and Porsche crossovers — is to simply authorize a massive buyback program. Breyer himself signaled he's open to that possibility.

Offering consumers cash to turn in their vehicles presents an alternative to trying to fix them all, which Volkswagen executives has said will be difficult because of the hardware changes that may be necessary to achieve compliance