Death of the Diesel: Daimler in US Agrees to Pay $1.5B for Noxious Diesel Emissions Fraud

Daimler AG and its subsidiary Mercedes-Benz USA LLC (MBUSA) have reached an agreement in principle with multiple U.S. authorities to settle civil and environmental claims regarding emission control systems of  ~250,000 diesel passenger cars and vans in the United States.

Vehicles involved in what AI calls Dieselgate starting with Volkswagen in 2015 had engine calibration software that caused them to emit fewer harmful diesel pollutants in lab tests than actual driving on the road.

The concerned U.S. authorities involved in the fraudulent cheating scandal are the Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environment and Natural Resources Division of the U.S. Department of Justice (DOJ), the California Attorney General’s Office, and the U.S. Customs and Border Protection.

Daimler AG and MBUSA have also reached an agreement in principle with plaintiffs’ counsel to settle the consumer class action “In re Mercedes-Benz Emissions Litigation,” which is pending before the U.S. District Court for the District of New Jersey.

For the settlements with the U.S. authorities, Daimler expects costs of approx. USD 1.5 billion* (€1.27 billion). The estimated cost of the class action settlement is ~$700 million (~ €592 million) including the court’s anticipated award of attorneys’ fees and costs. In addition, Daimler estimates further expenses of a mid-three-digit-million Euro amount to fulfill requirements of the settlements.

Daimler expects a corresponding impact on the Free Cash Flow of the industrial business over the next 3 years with the main impact within the next 12 months.

Today, the Board of Management as well as the Supervisory Board of Daimler AG and Mercedes-Benz AG have approved the proposed settlements after weighing all aspects in the best interest of the company. With the proposed settlements, the company takes an important step towards legal certainty with respect to various diesel proceedings in the United States.

The settlements are subject to the final approval of the relevant authorities and courts. The agreement in principle with the U.S. government authorities will be memorialized in binding consent decrees. In the coming weeks, the authorities will then lodge the consent decrees with a U.S. District Court for ultimate approval. The U.S. consumer class action settlement will be submitted to the U.S. District Court for the District of New Jersey for approval.

Daimler informed capital markets about the agreements in principle to comply with disclosure requirements of the European Market Abuse Regulation (MAR).

AutoInformed.com on Daimler

*Exchange rate € EUR to $USD as of 13 August 2020, 1€ = $1.183.

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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