Volkswagen's US diesel emissions settlement to cost $15b

Volkswagen AG's settlement with nearly 500,000 US customers and government regulators over polluting diesel vehicles is valued at more than $15 billion cash, two sources briefed on the matter said on Monday.

The settlement, to be announced on Tuesday in Washington, includes $10.033 billion to offer buybacks to owners of about 475,000 polluting vehicles and nearly $5 billion in funds to offset excess diesel emissions and boost investment in zero emission vehicles, the sources said.

A separate settlement with nearly all US state attorneys general over excess diesel emissions will be announced on Tuesday and is expected to be more than $500 million and will push the total to over $15 billion, a separate source briefed on the matter said.

Spokeswomen for US Environmental Protection Agency (EPA) and Volkswagen (VW) declined to comment.

The settlement stems from the German automaker's admission in September that it intentionally misled regulators by installing secret software that allowed US vehicles to emit up to 40 times legally allowable pollution.

The deal, based on the largest ever automotive buyback offer in US history and most expensive auto industry scandal, will move VW close to the 16.2 billion euros ($18 billion) it has set aside to cover the costs of the scandal.

Though about $5 billion higher than previously reported, the settlement gives firm details of costs in the United States where VW faces the bulk of expenses for its wrongdoing, more than nine months after the scandal broke.

"The deal looks reasonable and it will end uncertainty," said London-based Evercore ISI analyst Arndt Ellinghorst who has a "buy" rating on VW stock. "We expect the market to be OK with the higher number."

VW shares jumped as much as 4.7 percent on the news and were trading up 2.9 percent at 109.2 euros by 1002 GMT.

But criminal and civil legal action is still pending in other countries, while European governments are demanding VW offer similar compensation to the owners of 8.5 million rigged cars in the region, adding to risks that the costs could climb.

Speaking on condition of anonymity, due to court-imposed gag rules, the first sources said owners of 2.0 liter diesel VW 2009-2015 cars would receive at least $5,100 compensation along with the estimated value of the vehicles as of September 2015, before the scandal erupted. Some owners will get as much as $10,000 in compensation, the first sources said, depending on the value of the car.