A settlement between Volkswagen and its U.S. franchised dealers over the diesel-emissions scandal has been approved by a federal judge.

First announced last August, the settlement calls for VW dealers to compensated for the alleged loss in value of their franchises related to fallout from the scandal.

Dealers initially considered launching a class-action lawsuit against Volkswagen after being left out of the initial settlement for 2.0-liter TDI cars, but elected to negotiate with the automaker instead.

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Approved by U.S. District Court Judge Charles Breyer—who is also overseeing settlement for VW TDI owners—the dealer settlement calls for payments to be made to Volkswagen's 652 U.S. franchised dealerships over the next 18 months.

The order signed by Judge Breyer requires VW to make $1.2 billion in payments to dealers as compensation for alleged loss in brand value due to the diesel scandal.

It grants an average payout of $1.85 million to each dealer, according to law firm Hagens Berman, which represents the dealers in the case.

2014 Volkswagen Passat TDI

2014 Volkswagen Passat TDI

Half of the settlement payout will be made up front, while the rest will be paid in 18 equal consecutive monthly installments.

Of the dealers involved, 99 percent have already agreed to participate in the settlement, a Hagens Berman press release said.

ALSO SEE: What do VW dealers get from the diesel-emission settlement? (Jul 2016)

The total settlement is valued at $1.6 billion, including the $1.2 billion in payments to dealers, as well as $270 million through a provision for prior payments, and $175 million in continued incentive payments based on sales volumes.

In addition to compensation payments and the continuation of sales-based incentives, the settlement also limits Volkswagen's ability to require dealers to make certain capital improvements for two years.

2014 Volkswagen Passat TDI

2014 Volkswagen Passat TDI

It is not uncommon for automakers to periodically ask dealers to make upgrades or changes to their facilities, the cost of which is usually carried primarily by the dealers themselves.

A final provision of the settlement is the creation of a protocol for addressing any diesel cars with "defeat device" software that may still be on dealer lots.

MORE: VW dealers' reparations talks with company: no deal so far (Apr 2016)

Volkswagen issued a stop-sale order for these cars shortly after the diesel scandal broke last September.

Some of these cars are reportedly being transported to storage facilities in at least three U.S. states, alongside diesels bought back from customers.


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