The fallout from the dieselgate scandal continues to climb for Daimler AG, which has agreed to pay more than $2.2 billion in settlements with U.S. authorities and a class-action lawsuit. The company expects to pay an additional “mid-three-digit million” euros in fines and costs related to the settlements.
Daimler AG and its subsidiary Mercedes-Benz USA reached an agreement in principle with various U.S. authorities to settle civil and environmental claims regarding emission control systems of approx. 250,000 diesel passenger cars and vans sold in the United States.
The U.S. Environmental Protection Agency, the California Air Resources Board, the Environment and Natural Resources Division of the U.S. Department of Justice, the California Attorney General’s Office, and the U.S. Customs and Border Protection have agreed to the settlement. For the settlements with the U.S. authorities, Daimler expects costs of approximately $1.5 billion.
In addition, the company has agreed cooperate fully with the U.S. authorities and to continues to do so.
Daimler AG and MBUSA also 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, Daimler said.
The estimated cost of the class action settlement is approximately $700 million, including the court’s anticipated award of attorneys’ fees and costs.
The company has made sufficient provisions for the expected total costs of the settlements. In addition, Daimler estimates further expenses count to fulfill requirements of the settlements, accounting for the additional money.
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.
“With the proposed settlements, the company takes an important step towards legal certainty with respect to various diesel proceedings in the United States,” according to Daimler, which said the agreement has been approved by the company’s board of management.
“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.”
Daimler expects the consent decrees to be filed with a U.S. District Court in New Jersey for final approval. The settlement in the U.S. is only the latest chapter in Daimler’s diesel-related woes.
In January, Daimler agreed with KBA, the German regulator, that Mercedes-Benz customers in Germany could apply for a 3,000 euro or $3,350 subsidy to upgrade the exhaust filters of older, polluting diesel vehicles.
At the time, the expensive repair also was described as part of an effort by German carmakers to avoid inner-city bans in their home country, according to the German media. The fallout from “Dieselgate” has caught into Daimler’s earnings, contributing to the company billion-dollar loss in the second quarter of 2019.
Daimler has adamantly denied ever using the defeat device either in Europe or anywhere else. Nonetheless, the cost recalls and other expenses related to the shift away from diesels already cost Daimler more than $2 billion at the end of 2019.