Business Maverick

Business Maverick

Daimler Paying Over $2 Billion to Settle U.S. Diesel Issues

Mercedes-Benz AG trident logo decal badges sit on a tray on the assembly line at the premium automaker's factory, operated by Daimler AG, in Rastatt, Germany, on Monday, Feb. 4, 2019. Daimler announce full year earnings on Feb. 6.

Daimler AG will pay more than $2 billion to settle U.S. diesel-emissions matters in the latest fallout from years of closer regulatory scrutiny on vehicle pollution.

An agreement in principle with authorities including the U.S. Justice Department and Environmental Protection Agency will cost the German automaker roughly 1.27 billion euros ($1.5 billion), according to a statement Thursday. The Stuttgart-based company will pay another 592 million euros to settle class-action litigation brought by consumers.

The pacts resolve issues that arose after U.S. regulators stepped up their examination of diesel emissions in the wake of Volkswagen AG’s cheating scandal that emerged in 2015. The Justice Department asked Daimler to investigate the certification process of its cars the following year.

The agreement with U.S. authorities regards civil and environmental claims related to the emission-control systems of about 250,000 cars and vans in the U.S. Daimler expects to bear hundreds of millions of euros in additional expenses related to fulfilling requirements of the settlements and said the costs will impact its business over the next three years.

Smaller Scale

Although the expenses add to financial headwinds triggered by the Covid-19 pandemic, resolving U.S. diesel litigation will substantially reduce the manufacturer’s regulatory woes after it was forced to recall more than 770,000 Mercedes-Benz vehicles in Europe two years ago. Daimler had insisted that its emissions technology complied with the rules and that its case was different from the large-scale cheating committed by its rival. VW’s diesel scandal has cost the company more than 30 billion euros.

Daimler warned in its annual report published in February that German motor industry watchdog KBA is likely to rule that additional vehicles are “equipped with impermissible defeat devices.” The company boosted provisions for legal and regulatory costs as a result.

In its statement, Daimler said it has made “sufficient provisions” for the cost of the settlements. In the coming weeks, authorities will lodge consent decrees with a U.S. district court for final approval.

A spokesperson for the California Air Resources Board, one of the authorities involved in the settlement, said the consent decree is expected to be filed in mid-September.

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