German carmaker Volkswagen and US officials announced on Thursday that they had reached a compromise on a settlement in negotiations to compensate US owners of diesel cars equipped with software designed to thwart emissions tests in the laboratory.

The agreement involves VW's willingness to buy back a large number of the affected cars and the payment of substantial damages in a plan presented to US judge Charles Breyer at a hearing in San Francisco. If car owners so wish, their vehicles can also be fixed. Analysts said the deal could cost Volkswagen at least $10 billion (8.85 billion euros).

The deal met the Thursday deadline Breyer set for VW and US authorities to agree on a scheme to modify about 580,000 Volkswagen vehicles sold in the US.

The agreement in principle applies to 480,000 diesel cars in the US with 2-liter engines. Another 80,000 diesel cars with 3-liter engines are not covered by the deal.

The framework of the accord was hammered out by VW with the Justice Department, California state, the US Environmental Protection Agency and the Federal Trade Commission as well as lawyers for car owners who filed class action civil suits.

Looming costs

VW is facing mounting costs from lawsuits, official investigations, recalls and vehicle modifications in a large number of countries across the globe.

In the wake of the Dieselgate affair, the Wolfsburg-based carmaker has seen its global sales fall in recent months. The company announced in November it was planning to cut its workforce after plans to cap its 2016 investment spending at 12 billion euros ($13.6 billion).

Next week, the auto maker is due to formally report its 2015 annual results, which are expected to shed more light on the impact of the emissions-cheating scam.

hg/hch (AFP, dpa, Reuters)