(Bloomberg) -- A federal judge said Volkswagen Group has made "substantial progress" toward a settlement to get about 80,000 Audi, VW and Porsche vehicles with emissions-cheating 3.0-liter diesel engines fixed or off U.S. roads.
Lawyers for the carmaker, consumers and the Justice Department have assured the court that negotiations are ongoing, but VW may be headed to trial if an agreement isn't reached. In a hearing Friday in San Francisco, U.S. District Judge Charles Breyer said "intense discussions" were taking place and ordered lawyers to return to court Monday.
Since legal proceedings started in December 2015, Breyer has demanded swift progress to get the almost 600,000 cars off U.S. roads. That pressure may be intensifying, especially on consumers and regulators, as President-elect Donald Trump is expected to move quickly after his Jan. 20 inauguration to deregulate the energy industry and scale back the EPA's role.
How to deal with the three-liter vehicles is one of the last matters in U.S. courts for VW. Its resolution would be a major milestone for the carmaker as it tries to move beyond the self-inflicted, diesel cheating scandal.
Lawyers for the consumers said in March that they would ask for a non-jury trial. Breyer responded then that he would "seriously consider whether to hold a bench trial'' if a concrete solution wasn't reached. In August, Breyer asked plaintiffs to propose trial dates.
Elizabeth Cabraser, the lead lawyer for the plaintiffs, declined Friday to comment on the status of negotiations and remaining issues.
"Volkswagen is working hard to make things right, and we thank our affected customers in the United States for their continued patience," Jeannine Ginivan, a VW spokeswoman, said in an email Friday.
VW should get this part of the case settled now instead of waiting for a possible better deal with the incoming Trump administration, said law professor Carl Tobias. What Trump would do is unpredictable and there are other parties in the litigation, including consumers and state attorneys general, who could pursue claims no matter what the federal government does, said Tobias, of the University of Richmond in Virginia.
"Trump could just say, 'Stuff it,' to VW,'' particularly since it's a foreign company, Tobias said. The remaining plaintiffs could push for a trial, which would prove risky and a "reputational hit" for VW, he said.
VW also needs to get the civil claims resolved while the criminal investigation is still "hanging fire," the professor said. "They'd be wise to try to wrap up the civil given all the uncertainties of a new administration, especially if they can get a figure they can live with," Tobias said.
Breyer gave his final approval in October to the carmaker's settlement covering 480,000 Volkswagens with 2.0-liter engines. Breyer allowed parties in the two-liter dispute to come to an agreement before regulators approved a repair for the engines. He hasn't given them the option with three-liter vehicles to settle first and work out the details, including fixes, later.
Volkswagen has agreed to pay as much as $16.5 billion, an industry-record, to resolve claims over the two-liter diesel cars. As of Nov. 20, more than 80 percent of the two-liter owners have registered to participate in the settlement. Eighty-five percent of those cars must be removed from U.S. roads or VW will face additional penalties.
Progress on a settlement for the three-liter vehicles has been kept under wraps. Under an accord with the Environmental Protection Agency and California's Air Resources Board, Volkswagen would get the go-ahead to fix some 60,000 vehicles and offer to repurchase about 19,000 older models that would be too complex to repair, people familiar with the negotiations said last month. The people asked not to be identified because the talks are confidential. The recall plans involve a simple software update, and avoiding a full buyback of all the cars would save the company about $4 billion, the people said.
Reuters reported Friday that VW had agreed to pay more than $200 million to offset emissions from the three-liter vehicles that exceeded pollution limits.
As VW heads toward a settlement in the U.S. with consumers and the government, Breyer is already queuing up the next phase of litigation -- shareholder claims of securities fraud against the company and former CEO Martin Winterkorn. They are accused of deliberately misleading investors about the "diesel issue" before the scandal blew up and VW stock tanked. The company and Winterkorn have denied the allegations, saying the investors can't prove they knew the extent of the problem.
The case is In Re: Volkswagen "Clean Diesel" Marketing, Sales Practices and Products Liability Litigation, 15-02672, U.S. District Court, Northern District of California (San Francisco).