Volkswagen Canada Inc. will buy back, repair or compensate owners of more than 100,000 vehicles equipped with diesel engines that pumped pollutants into the air as part a scheme to cheat on emissions tests – a scandal that has damaged the reputation of its parent company Volkswagen AG and is likely to cost the auto maker billions of dollars.

A settlement in the battle between Volkswagen, the U.S. government and the state of California over the scandal was presented in a San Francisco court Thursday and the results will apply to owners of vehicles sold in Canada, Volkswagen Canada spokesman Thomas Tetzlaff said.

"It is my understanding the settlement will give consumers several options including the option to have Volkswagen buy back their vehicle," U.S. federal court judge Charles Breyer said in a comment on the deal presented to him.

Story continues below advertisement

The vehicles contained so-called defeat devices that showed the diesel engines meeting regulatory requirements when being tested for emissions, but that were then shut off during regular driving.

Judge Breyer said final details of the settlement are still being negotiated, but need to be in place by June 21.

"Rest assured that what happens in the U.S. will be mirrored in Canada," Mr. Tetzlaff said.

The scandal erupted last September and led to Volkswagen and its luxury brand Audi halting sales of some vehicles containing 2.0-litre and 3.0-litre diesel engines.

Sales of models equipped with diesel engines represent about 20 per cent of Volkswagen Canada sales.

The U.S. judge said the settlement includes Volkswagen's offer to buy back 482,000 2.0-litre diesel-equipped vehicles sold to U.S. customers, fix them if regulators agree on that step after further testing, or cancel outstanding leases.

The U.S. settlement will include an environmental remediation fund to address excess emissions and additional "substantial compensation" to owners to sell back or have their vehicles fixed, Judge Breyer said. The size of the fund and the amount of the compensation to owners were not disclosed.

Story continues below advertisement

Volkswagen Canada sales have slumped since the emissions cheating was revealed last September. Deliveries fell by double digits in each of the past three months.

George Iny, who heads the Automobile Protection Agendcy, a Canadian consumer group, said there are about 30 lawsuits filed against Volkswagen Canada, most of them seeking damages to compensate owners of vehicles whose value has plunged.

"Volkswagen should have/could have offered more timely information, connected with their customers on a regular basis and offered communications training and support to their front-line personnel, at the dealer level and internally," Mr. Iny said in an e-mail Thursday.

Canadian buyers of diesel vehicles said they have had no communication from the company for several months.

One lawsuit files by a Quebec environmental group, the Association Quebecoise de Lutte Contre la Pollution Atmospherique, seeks damages of $15 and punitive damages of $35 for each of about 8.3 million Quebeckers because of the increased pollution pumped into the air.

Environment and Climate Change Canada, which regulates the environmental impact of vehicles, is still assessing the Volkswagen situation, said Caitlin Workman, a spokeswoman for Minister Catherine McKenna.

Story continues below advertisement

The ministry does not have the authority to order Volkswagen to buy back vehicles, but if the company is convicted under the Canadian Environmental Protection Act, the government can order it to take remedial action to offset any harm done to the environment.

A conviction could also carry a fine of up to $6-million.

With files from Reuters