Image copyright Reuters

Volkswagen has more than doubled its provisions for the diesel emissions scandal to €16.2bn (£12.6bn).

Last year it told shareholders that €6.7bn had been set aside for potential costs or recalls.

The increased sum included the cost of fixing cars that violate air pollution standards, buying back vehicles and legal costs.

The move comes as German carmakers agreed to recall 630,000 diesel vehicles to tweak engine software.

German transport minister Alexander Dobrindt said Mercedes Benz, Opel and Porsche as well as Volkswagen and Audi would adjust settings that increased levels of emissions such as nitrogen dioxide in some diesel cars.

Transport secretary Patrick McLoughlin said he would ask the manufacturers if they would offer similar fixes to UK car owners.

Shares in Daimler fell 4.6% in Frankfurt after the Mercedes owner said it had begun an internal investigation into its diesel emissions testing at the request of the US Justice Department.

It said net profit for the first quarter fell by a third to €1.4bn, held back by costs associated with the launch of the new E-Class range. The bigger-than-expected decline came despite a 2% rise in revenue to €35bn as sales rose 7% to 683,885 vehicles.

VW chief executive Matthias Mueller said he could not put a figure on the total cost of the emissions scandal until a final deal was reached with US authorities.

Nor could the company release preliminary findings from an investigation it commissioned from law firm Jones Day until reaching an agreement, it said.

Image copyright Getty Images Image caption Volkswagen chief executive Matthias Mueller replaced Martin Winterkorn in the wake of the emissions revelations

VW still faced US Justice Department fines as part of an expected civil settlement, as well as possible criminal charges.

On Thursday, a US court disclosed details of a deal between VW and the US Department of Justice for more than 500,000 American owners of its diesel cars affected by the emissions cheating.

The deal will involve buybacks and "substantial" compensation for owners of mostly two-litre vehicles.

US district court Judge Charles Breyer said he expected an agreement between VW and regulators covering about 90,000 larger vehicles and SUVs to be addressed "expeditiously". Final details of the packages offered will be announced in June.

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VW losses

The increased emissions provision pushed VW to an annual pre-tax loss of €1.3bn, compared with a profit of €14.7bn the previous year.

VW expected group sales to fall by up to 5% in 2016.

Chief financial officer Frank Witter said: "We are again operating in an exceedingly challenging environment in which global demand for new vehicles is declining, exchange rates and interest rates remain highly volatile and competition in many of our markets is intensifying."

Shares in VW closed down 1.7% in Frankfurt on Friday and are more than 40% lower than at this time last year.

Analysts at Evercore ISI said in a note: "Investors should be relieved by the fact that VW has put a number on the financial risk associated with the vast majority of its diesel issues... Management should now be in a position to more actively address the turnaround plan for the VW brand.

NordLB analyst Frank Schwope, who has a "hold" rating on VW shares, said: "The crisis in Wolfsburg is far from over yet."