By Sara Randazzo 

Volkswagen AG has agreed to pay up to $1.2 billion to its 652 U.S. dealers as compensation for a long emissions cheating scheme, deepening penalties the German auto maker faces.

Dealers will receive an average payout of $1.85 million apiece in the settlement, according to filings made Friday in U.S. District Court in San Francisco. Volkswagen over the summer agreed to pay up to $15 billion in a separate settlement with federal regulators and consumers, and the additional $1.2 billion was disclosed in the Friday filings.

Franchised dealers have been stuck holding inventory since the emissions scandal emerged and shouldered other financial burdens, including a potential decline in dealership value or damaged reputations.

A year ago, Volkswagen was forced to stop sales of diesel-powered vehicles in the U.S. due to so-called defeat devices that allowed hundreds of thousands of cheat on emissions tests.

In a separate court filing Friday, attorneys for consumers said more than 311,000 of the 475,000 eligible to join say they want to take advantage of the terms in a $10 billion settlement with U.S. drivers of 2.0-liter diesel-engine vehicles.

The filing urged the court to give final approval to the deal, which could come as soon as a scheduled Oct. 18 hearing. Volkswagen and the U.S. Justice Department also asked the court to approve the deal in Friday filings.

The settlement offers consumers a choice of selling back their diesel-engine vehicle, or getting it modified by an as-yet-undetermined fix to reduce emissions levels. All consumers will also get additional compensation on top of either choice. Plaintiffs' lawyers noted in the Friday filing that the terms will compensate the average driver with a minimum of nearly 113% of the retail value of their vehicle before the scandal broke in September 2015.

If approved in its current form, drivers will still have until fall 2018 to officially join the class-action deal.

Drivers of larger, 3.0-liter vehicles impacted by the emissions crisis are still waiting for their own deal.

Write to Sara Randazzo at sara.randazzo@wsj.com

(END) Dow Jones Newswires

September 30, 2016 21:21 ET (01:21 GMT)