(Reuters) -- The head of Volkswagen Group's core VW brand, Herbert Diess, said he is confident that the automaker will reach agreement with U.S regulators to bring nearly 500,000 diesel vehicles into compliance with U.S. emissions laws.
"We are confident we will find an acceptable solution," Diess said at a press conference at the Consumer Electronics Show in Las Vegas on Tuesday.
In an interview with Reuters, Diess said fixing older VW cars equipped with 2.0-liter diesel engines will be more difficult than bringing more recent models into compliance. "The intrusion into the car will be quite significant," Diess said of the older models.
Some U.S. regulators and lawmakers have said VW may have to buy back older models. Diess didn't say whether VW is discussing that, but said he is optimistic an agreement with U.S. regulators will be reached soon. "It's a very constructive dialogue," he said.
Earlier a source told Reuters that VW is struggling to agree with U.S. authorities on a fix for vehicles capable of cheating emissions tests. Finding a fix was proving more difficult than expected, in part because this involved producing new components which then required testing, said the person, who declined to be named as the talks are confidential.
VW will hold further talks with the Californian Air Resources Board this week and with the U.S. Environmental Protection Authority (EPA) next week, and still hoped to reach a solution by a mid-January deadline, the source said.
VW Group CEO Matthias Mueller is expected to meet EPA representatives and politicians in Washington next week after visiting the Detroit auto show on what will be Mueller's first trip to the United States since the scandal broke in September.
Diesel key role
Diess said diesel technology will still play an important role in VW's future product strategy. "Diesel still has a future in some segments," including in SUVs, "and in some markets it will be a must," he said. Europe will still be a major diesel market in the next decade, Diess said.
Volkswagen has admitted it installed software in certain diesel models sold in the U.S., that allowed the cars to pass government emissions tests, but then emit nearly 40 times the allowed levels of pollutants on the road.
The U.S. Justice Department on Monday sued Volkswagen for up to $48 billion for allegedly violating U.S. environmental laws.
Diess said Volkswagen expects the company will be able to repair by the end of 2016 about 8.5 million diesel cars sold in Europe that don't comply with emissions standards.
Diess showed off VW's concept for an electric, highly connected microbus, called the Budd-e, which he said could be brought to market by 2020.
The concept is the first VW to ride on a new modular platform toolkit designed for electric vehicles that the automaker intends to deploy across its brands. The BUDD-e concept has a 101-kilowatt-hour battery providing up to 373 miles (600km) of range in the New European Driving Cycle. It can be recharged to 80 percent in 15 minutes, the company said.
Separately, Diess announced a new partnership with Mobileye, the Israeli machine vision company that is a leader in camera technology used in advanced safety features such as automatic braking or lane departure warning.
VW and Mobileye signed on Tuesday an agreement under which Mobileye's camera systems will beef up the mapping systems VW cars will use to enable autonomous driving, Diess said.
"We always have to look at partnerships," Diess said. "This world is changing so much faster than our traditional world" of automotive suppliers.
Ryan Beene of Automotive News contributed to this report