U.S. judge sets April 21 deadline for VW, EPA to reach diesel fix

(Reuters) -- A U.S. judge today gave Volkswagen AG and U.S. regulators until April 21 to reach a diesel emissions fix covering about 600,000 vehicles following the automaker's massive emissions cheating scandal.

U.S. District Judge Charles Breyer, and lawyers for the Justice Department and VW, said at a court hearing in San Francisco that they were making progress in intensive negotiations, but issues remain and no settlement has been reached yet.

Breyer said the remedy could involve fixing the 580,000 vehicles on U.S. roads or buy backs and other options, but said he would not disclose any details of the ongoing talks.

If no deal is reached by April 21, Breyer said he would consider holding a trial on the issue this summer to address the vehicles that the U.S. Environmental Protection Agency says emit up to 40 times legally allowable pollution in real world driving.

“Volkswagen is committed to resolving the U.S. regulatory investigation into the diesel emissions matter as quickly as possible and to implementing a solution for affected vehicles, as we work to earn back the trust of our customers and dealers and the public," VW said in a statement today.

"We continue to make progress and are cooperating fully with the efforts undertaken by Judge Breyer, working through Director (Robert) Mueller, to bring about a prompt and fair resolution of the U.S. civil litigation.”

Mueller is the former U.S. FBI director appointed by Breyer to be the settlement master for VW’s litigation. 

Breyer last month set a deadline of today for VW to state whether it has found an emissions fix that is acceptable to U.S. regulators. 

One central issue is whether the EPA will accept a fix that does not completely address excess on-road emissions. Earlier this month, a California Air Resources Board (CARB) official said the state may allow partially repaired VW diesel cars to continue operating on its roads because a full fix may be impossible.

The agreement being negotiated also includes creating national and California funds to make amends for past and future environmental damage and solutions to reduce the pollution from the affected vehicles or remove them from the road, people familiar with the talks have said.

The affected cars are equipped with "defeat devices" that allow them to pass laboratory emissions tests despite exceeding federal standards by up to 40 times when they are driven on roads.

Buyback costs

The cost of buying back all the affected vehicles could be $9.4 billion, according to Bloomberg Intelligence analyst Brandon Barnes.

Todd Sax, chief of CARB's enforcement division, said this month he did not believe a fix was available that would allow the cars to comply with the emissions standards or the onboard diagnostic requirements. "We will have to decide what the best approach is to dealing with these vehicles, and one of the options potentially would be to accept something less than a full fix," he said.

The U.S. Justice Department in February sued VW for up to $46 billion for violating U.S. environmental laws.

A settlement could help reduce that financial hit significantly. It would also free VW to focus more on overhauling its products and operations in the U.S. VW's plans include updating models every five years instead of seven, adding SUVs and buying more parts locally.

And engineers at VW's only U.S. factory, in Chattanooga, Tenn., will steer the new projects, reversing the failed pattern of planning cars for the North American market at the automaker's headquarters in Wolfsburg, Germany.

VW and its Audi and Porsche brands remain barred from selling any new 2016 diesel models in the United States.

"We're working around the clock" said plaintiffs' attorney Elizabeth Cabraser, leaving the courtroom after the brief hearing. "I'll sleep when they're fixed."

VW spokeswoman Jeannine Ginivan said the automaker "is committed to resolving the U.S. regulatory investigation into the diesel emissions matter as quickly as possible and to implementing a solution for affected vehicles, as we work to earn back the trust of our customers and dealers and the public."

Former Federal Bureau of Investigation director Robert Mueller, who is Breyer's court appointment settlement master, briefed the judge on the status of the talks on Wednesday.

EPA spokeswoman Laura Allen declined to comment. David Clegern, a spokesman for the California Air Resources Board, said there is nothing the agency can say "at this point." Mark Abueg, a spokesman for the Department of Justice, also declined to comment.

After Thursday's hearing, Sierra Club California Chapter Director Kathryn Phillips suggested that U.S. environmental groups would reject any settlement with VW that fails to hold the automaker fully accountable for excess tailpipe emissions.

"(The) polluting vehicles need to be fixed or taken off the road, and the consumers who trusted they were buying less-polluting cars need to be compensated. Period. Otherwise the legacy of Volkswagen's deceitful actions will be as dirty and dangerous as the smog left behind by their vehicles," Phillips said in a statement.

Automotive News Europe and Bloomberg contributed to this report