Volkswagen agrees $1.6bn settlement for US diesel car claims

German car-maker Volkswagen AG will pay out $1.6bn in order to settle claims made against it in the US related to Dieselgate - a figure which could rise to $4.04bn if regulators do not approve the settlement.

The agreement will involve Volkswagen fixing or buying back as many as 80,000 3.0 litre vehicles, according to a court document file on Tuesday.

In December Volkswagen said it had agreed to repurchase 20,000 cars and would repair 60,000 more, but the company would face a hefty price if the solution was not agreed to by regulatory bodies.

The settlement would represent the last major obstacle for Volkswagen in its attempts to rebuild its reputation, after it was found to have installed emissions cheating devices in its cars in 2015.

The German company has been banned from diesel cars since the end of 2015.

Volkswagen's Group of America chief executive Hinrich Woebcken said that the customers affected "will have a resolution available to them. We will continue to work to earn back the trust of all our stakeholders."

Dieselgate appears to have been shaken off by Volkswagen, after it was announced as the best selling automaker in the world on Tuesday. A 3.8% gain led to 10.3 million vehicles being sold in 2016, ahead of former number one Toyota.

In a separate case, car parts supplier Robert Bosch has agreed to pay $327.5m to compensate the owners of the affected vehicles. Claimants alleged that Bosch was a "knowing and active participant" in Volkswagen's emission cheating scandal.