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VW is expanding its plant in Chattanooga, Tennessee to get ready for production of a new mid-size SUV later this year (Photo: VW)

Volkswagen Group said it had reached a settlement with US regulators, private plaintiffs and 44 US states on penalties to pay for manipulating the emissions of almost 500,000 diesel-powered cars it sold in the US in recent years.

The agreement will cost the carmaker as much as 15 billion dlrs in compensation to Volkswagen car owners, contributions to an environmental trust and investments in the US electric-vehicle infrastructure.

“We take our commitment to make things right very seriously and believe these agreements are a significant step forward,” VW Group CEO Matthias Mueller said in a statement.

In September of 2015 VW admitted that it had installed so-called defeat devices on millions of its cars. The software detects when a vehicle is being subjected to emissions tests. It then tells the engine management system to adjust engine performance so emissions are reduced. The results of the test bear little resemblance to car emissions generated in real traffic.

In the wake of the revelations, the company’s top management ranks were reshuffled and VW developed a new strategic roadmap that focuses more on alternative powertrains and new mobility and less on the sale of traditionally powered vehicles.

On April 22, Europe’s largest carmaker earmarked 16.2 billion euros for exceptional charges in its 2015 accounts. As VW said in a statement, the charges were “for worldwide provisions related to technical modifications and repurchases, legal risks and other items as a result of the diesel matter.”

VW’s chief financial officer, Frank Witter, said Tuesday that, from a financial point of view, VW can absorb the high costs. "Today’s announcement is within the scope of our provisions and other financial liabilities that we have already disclosed," he said. "We are in a position to manage the consequences.”

As part of the US settlement, VW will:

·    Buy back or terminate the leases of eligible vehicles, or provide free emissions modifications (if approved by regulators), and also make cash payments to affected current and certain former owners and lessees. Customers can sell back their vehicle to VW or terminate their lease without penalty. If a modification is approved, they can choose to have their VW modified free of charge and keep it. Customers who select any of these options will also receive a cash payment from VW.

·    Establish a maximum funding pool for the 2.0L TDI settlement program of 10.033 billion dlrs. That amount assumes that all people affected participate and that they all opt for a buyback or lease termination. VW’s 2 liter diesel engine (2.0L TDI) is at the heart of the emissions scandal.

·    Pay 2.7 billion dlrs over three years into an environmental trust managed by a trustee appointed by the court, to remediate excess nitrogen oxide (NOx) emissions from 2.0L TDI vehicles.

·    Invest 2.0 billion dlrs over 10 years in zero-emissions vehicle (ZEV) infrastructure, access and awareness initiatives.

·    Pay about 603 million dlrs to resolve consumer protection claims in 44 US states.

The 2.0-liter TDI engines that are the focus of the settlement were installed in the following VW and Audi models in the US.

·    VW Beetle 2013-2015

·    VW Golf 2010-2015

·    VW Jetta 2009-2015

·    VW Passat 2012-2015

·    Audi A3 2010-2013; 2015

 -By Arjen Bongard