VW Reaches Tentative Diesel Settlement with U.S. Dealers

Volkswagen AG told a U.S. District Court in San Francisco today that it has reached an agreement in principle to compensate its VW-brand dealers in the U.S. for the financial impact of the company’s diesel emission cheating scandal. Sources tell Reuters the deal is worth about $1.2 billion.

The deal follows an initial April lawsuit filed against VW in Illinois. The plaintiffs filed the initial lawsuit in April in Illinois, but the proceedings were transferred to the California court.

VW says has agreed to make cash payments and provide unspecified “additional benefits” to its dealers to compensate them for past, present and future claims of lost franchise value. Both sides have been eager to avoid a court battle for the sake of repairing factory-dealer relations.

The company admitted a year ago that it doctored 11 million diesel-powered vehicles, including more than 500,000 sold in the U.S., to evade emission limits. Since then its dealers have been banned from selling diesel vehicles, which formerly accounted for roughly 20% of their sales.

Details concerning the agreement are still being negotiated. VW predicts terms will be finalized by the end of September, pending court approval.