Daimler AG and Mercedes Benz Settle with US for $1.5 Billion for Emissions Cheating

Michael Volkov
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The Volkov Law Group

The Justice Department, the Environmental Protection Agency and the California Resources Board  announced a joint settlement totaling roughly $1.5 billion with Daimler AG and its US subsidiary Mercedes Benz to resolve violations of the Clean Air Act and California law from the emissions cheating scandal.

The EPA and CARB discovered the violations by conducting tests in the wake of the original Volkswagen emissions cheating scandal.  The Mercedes emissions systems included defeat devices and were intended to increase fuel mileage and performance and boost sales to the detriment of compliance with applicable emissions standards.

Daimler agreed to recall and repair the emissions systems in Mercedes diesel vehicles sold in the US between 2009 and 2016 and pay approximately $945,300 in penalties.  Also, Daimler agreed to extend the warranty period for parts in the repaired vehicles, perform projects to mitigate excess ozone-creating nitrogen oxide (NOx) emitted from the vehicles and implement new internal audit procedures to prevent a recurrence of the cheating scandal.  The recall program and federal mitigation project are expected to cost Daimler around $436 million. 

Daimler also will pay another $110 million to fund mitigation projects in California.  Added together, the settlement is valued at approximately $1.5 billion.

From 2009 to 2016, Daimler manufactured, imported and sold more than 250,000 diesel vans and cars with undisclosed emission control devices and defeat devices designed to circumvent emissions standards set by the EPA.  These devices caused the vehicles to generate results that complied with emissions tests.  However, when not being tested, the vehicles had programmed emissions controls to operate differently, and less effectively, resulting in an increase in NOx emissions above the mandated maximum standard.

NOx emissions play a significant role in ground-level ozone production and cause harm to human health.  Breathing ozone may damage lung tissue in children and adults, and cause further harm to humans with conditions like asthma, emphysema and bronchitis.  recent scientific studies indicate that the direct health effects of NOx are worse than previously understood, including respiratory problems, damage to lung tissue, and premature death.

Under the settlement, Daimler will implement a recall and repair program to remove all emissions defeat devices at no cost to consumers.  The repair includes a software update and replacement of hardware for different years and models.  Mercedes vehicles will be brought into compliance with Clear Air Act requirements.

Daimler is subject to a requirement that it repair at least 85 percent of the vehicles within two years and 85 percent of certain vans within three years.  Daimler has to extend the warranty for the new software and hardware, and it must test repaired vehicles each year for the next five years to ensure compliance with the emissions standards.  Daimler will face set penalties if it fails to meet the applicable recall rates.

As part of the settlement, Daimler has to implement systemic corporate compliance enhancements to detect and prevent eliminate violations in the future.  These reforms include use of a portable emissions measurement system, install a robust whistleblower program, enhance training and perform internal audits subject to review by an external compliance consultant.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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