ORIGINALLY PUBLISHED BY AUTOMOTIVE NEWS

WASHINGTON -- A federal judge said Volkswagen AG has reached an agreement in principle to provide "substantial compensation" to the owners of about 80,000 3.0-liter polluting diesel vehicles, a key hurdle to resolve the German automaker's emissions scandal.

U.S. District Judge Charles Breyer, during a hearing today in San Francisco, did not disclose the amount of owner compensation, which is not included in a $1 billion settlement announced earlier this week between VW and U.S. regulators. Half of the compensation will be paid at the time Breyer gives final approval of the settlement. Some fixes for the 3.0 liters may not be approved until 2018, Breyer said. 

Earlier this week, Volkswagen reached the $1 billion settlement with U.S. regulators, offering to buy back about 20,000 of the vehicles, fix the remaining 60,000 and pay $225 million into an environmental trust fund to offset the vehicles' excess emissions.

The settlement covered luxury VW, Audi and Porsche vehicles with 3.0-liter engines. With the agreement, Volkswagen would spend as much as $17.5 billion in the U.S. to resolve claims from owners as well as federal and state regulators over polluting diesel vehicles in addition to compensation for the 3.0-liter owners. 

Volkswagen spokeswoman Jeannine Ginivan said the automaker was pleased with the agreement in principle, but said details will remain confidential for now.

Breyer said the final agreement must be filed with the court by Jan. 31, and he expects to hold a Feb. 14 hearing to approve the deal.

The U.S. Federal Trade Commission is also expected to back the deal, Breyer said.

Volkswagen, the world's No. 2 automaker, could still spend billions of dollars more to resolve a U.S. Justice Department criminal investigation and federal and state environmental claims and come under oversight by a federal monitor.

It is possible a deal could be reached before the end of the Obama administration, said sources briefed on the matter.

Breyer in October approved VW's earlier settlement worth about $15 billion with regulators and the U.S. owners of 475,000 polluting diesel vehicles with smaller 2.0-liter engines, including an offer to buy back all of the cars.

VW lawyer Robert Giuffra said today the automaker has offered buybacks to nearly 200,000 customers and 104,000 have accepted the offer at a value of nearly $2 billion.

VW had agreed to pay $5,100 to $10,000 in compensation to each of the U.S. 2.0-liter owners. If the new settlement follows the pattern, it could add $400 million to $800 million to the 3.0-liter settlement.

But funds from a separate settlement with German auto supplier Robert Bosch GmbH are expected to defray VW's compensation costs.