VW has begun the long, painful and expensive road to reputation recovery in the US

VW finalises compensation for US dealers over emissions scandal

Volkswagen has tentatively reached a final deal with its US dealer network to compensate them for losses they claim to have suffered as a result of the company's emissions cheating scandal.

The full value of the settlement with the 652 dealerships was not disclosed, although Volkswagen said in a statement that it would include cash payments.

"We believe this agreement in principle with Volkswagen dealers is a very important step in our commitment to making things right for all our stakeholders in the United States," said Hinrich J Woebcken, CEO of Volkswagen North America.

Details of the settlement are still under discussion. US District Court Judge Charles Breyer gave the lawyers until the end of September to submit a final proposal. The deal would require Judge Breyer's approval.

The settlement also includes $2.7 billion (£2 billion) for unspecified environmental mitigation and an additional $2 billion (£1.5 billion) to promote zero-emissions vehicles.

Judge Breyer gave the deal preliminary approval last month.

Volkswagen previously reached an agreement with US attorneys for car owners. That deal calls for it to spend up to $10 billion (£7.6 billion) buying back or repairing approximately 475,000 vehicles and paying their owners an additional $5,100 (£3,800) to $10,000 dollars each. Specific details about the vehicle repairs have yet to be announced.

This settlement does not cover 85,000 the more powerful Volkswagens and Audis with three-litre engines also involved in the emissions scandal.

Volkswagen lawyer Robert Giuffra said the company was prepared to submit a fix for some of those vehicles by early November that would bring them into compliance with clean energy laws. Any fix proposed by Volkswagen would have to be approved by government regulators before it could be implemented.

Around half a million cars are implicated in the scandal in the US, with around 11 million vehicles affected globally. Volkswagen is maintaining its stance on not offering compensation to affected European customers, who make up a large proportion of those 11 million.

A statement released by Volkswagen Group of America said: "Volkswagen has agreed to make cash payments and provide additional benefits to the dealers to resolve alleged past, current and future claims of losses in franchise value.

"Details of the agreement in principle are still under discussion and are expected to be finalised at the end of September. Any proposed agreement will become effective only after approval by the Court."

"Volkswagen and the dealers’ counsel will now work to finalise details of the proposed settlement, including how to apportion payments to dealers in the appropriate manner."

The dealer settlement means VW has already agreed to spend at least $16.5 billion in total to address emissions issues in the US, with the company potentially further facing billions of dollars in civil and criminal US fines for violating emissions laws.

As a result of the scandal, VW’s US sales are down 13.6 percent in 2016 so far, having fallen five per cent in 2015. This represents a decline of over 28,000 vehicles.

However, in spite of the VWgate emissions scandal, VW has become the world's top-selling carmaker by volume worldwide in the first six months of 2016. The company delivered over five million vehicles in the first half of 2016, a rise of 1.5 per cent year on year.

VW has managed to maintain sales in part by offering incentives to buyers in the United States and other markets while it repositions its business by investing in electric cars and on-demand transport services.

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