US reaches $1.5 billion settlement with Daimler over emissions scandal

US prosecutors and Daimler AG have agreed on a settlement worth $1.5 billion to lay to rest the emissions cheating scandal. 

On Monday, the US Department of Justice (DoJ) said the deal, proposed between the DoJ, Environmental Protection Agency (EPA), California Air Resources Board (CARB), and Daimler — as well as its US subsidiary Mercedes-Benz USA — will wipe the slate clean when it comes to allegations of violating the US Clean Air Act.

Under the terms of the settlement, set in the US District Court for the District of Columbia, Daimler will agree to pay $945 million in penalties, civil and otherwise. In addition, the automaker will recall and repair every Mercedes-Benz diesel vehicle sold in the US with a defeat device, the gadget at the heart of the emissions scandal. 

The emissions scandal involving Volkswagen and Daimler came to light back in 2016. So-called “clean diesel” engines were developed to enable the sale of vehicles in the United States, but engineers realized the engines were pumping out more nitrogen oxide (NOx) than legally allowed.

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Defeat devices were developed to ensure tests in laboratories would show that clean diesel vehicles conformed to US laws, but in real-world situations, NOx levels were far higher. 

The discrepancy and defeat devices were discovered by the US Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), leading to the complaint. Volkswagen was previously ordered to pay up to $14.7 billion to resolve Clean Air Act violation charges. 

The DoJ says that Daimler must recall and repair vehicles sold in the US between 2009 and 2016. At no cost to customers, the company will remove defeat devices and update vehicle software to bring cars in line with US environmental laws. 

In addition, the Stuttgart, Germany-based company must extend warranties for updated software and hardware in the repaired vehicles, and launch “projects” to further reduce NOx emissions from these vehicles.

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These projects are expected to cost Daimler roughly $436 million, while another $110 million has been earmarked for mitigation projects in California alone. The settlement is worth approximately $1.5 billion in total. 

A deadline has been set for repairs, too. Daimler is not being allowed to drag its feet, with the imposition of a two-year period to repair at least 85% of cars, and a three-year timeline has been set to patch up at least 85% of affected vans. Repaired vehicles must be tested once a year for the next five years to ensure they meet environmental standards.

If Daimler does not meet these targets, the DoJ warns that the automaker “will face stiff penalties.” 

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Furthermore, the automaker is required to implement new internal procedures, including testing both diesel and gas engines properly in real-world conditions, creating a whistleblower channel, and performing internal audits available for review by an external consultant. 

“By requiring Daimler to pay a steep penalty, fix its vehicles free of charge, and offset the pollution they caused, today’s settlement again demonstrates our commitment to enforcing our nation’s environmental laws and protecting Americans from air pollution,” Deputy Attorney General Jeffrey Rosen commented.

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