Daimler Is Paying The U.S. $2 Billion To Settle Dieselgate

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Daimler made a huge announcement yesterday that it will settle its diesel emissions cheating scandal with the United States for $2 billion and some change.

There are two parts to the settlement/fines. First is $1.5 billion (~€1.27 billion) as a settlement with US authorities, and then there’s $700 million (€592 million) in a class action settlement. “In addition, Daimler estimates further expenses of a mid three-digit-million EUR amount to fulfill requirements of the settlements.”

You may have forgotten this was lingering, especially since much of the dieselgate scandal was centered around Volkswagen Group, but it has been a major matter for Daimler to resolve that it seems will finally be put in the rearview mirror. The company summarizes:

“Daimler AG and its subsidiary Mercedes-Benz USA LLC (MBUSA) have 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 in the United States. The involved U.S. authorities 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.

“The company has cooperated fully with the U.S. authorities and continues to do so.”

This is wild. Daimler appears to have gotten out ahead of the DOJ / EPA / CA AG by *weeks* and announced that it settled the four-year-long probe into its own diesel emissions cheating scandal in the US https://t.co/tnyYMMUbaY

— Sean O'Kane (@sokane1) August 13, 2020

The settlement concerns the sale of approximately 250,000 diesel passenger cars and vans sold in the United States that had emissions-related cheating software.

The involved US authorities involved in the case were the:

• Environmental Protection Agency (EPA)
• California Air Resources Board (CARB)
• Justice Department’s Environment and Natural Resources Division
• California Attorney General’s Office
• U.S. Customs and Border Protection.

All are ending the 4-year investigation that started from the discovery of VW’s related dieselgate scandal.

The company expects that this settlement will impact its free cash flow of the industrial business over the next three years. The main impact will be within the next year.

Daimler’s Part In Dieselgate

“Dieselgate” refers to what kicked off when researchers in West Virginia discovered that devices and software in Volkswagen vehicles were cheating in emissions testing. They would trigger the vehicles to act a certain way when being tested but them act differently when being driven on the road by consumers. In 2015, the US EPA issued a notice of violation of the Clean Air Act to Volkswagen Group, and a broader investigation ensued. (Note: the Clean Air Act has recently had its strict rules weakened by the Trump Administration. The updates are intended to change the way the EPA uses cost-benefit analyses to enact Clean Air Act regulations — to limit the strength of future air pollution controls rather than strengthen them.)

Daimler’s part in the scandal was that it fit affected vehicles with a special type of software that cheated diesel engine emissions testing similar to way VW cheated the testing. A search warrant issued in 2017 claimed that Daimler had sold more than 1 million such vehicles in the US and Europe. These devices allowed the vehicles to pass emissions testing and secure road safety approval under EU and US emissions regulations by being able to sense when a vehicle was on a test cycle. Once it sensed that, it used emissions-reducing technology to fake its way through the test. However, once they hit road, the vehicles produced quantities of NOx emissions that were well above EU and US standards.

In Germany, Daimler was fined €870 million (~$960 million) after 774,000 vehicles fitted with the defeat devices were recalled in 2018. In 2019, Germany found out that 280,000 Mercedes-Benz C-class and E-class vehicles were also outfitted with these defeat devices. The UK has noted that around half a million vehicles may contain these devices.

What Does This Mean For America?

The settlement, according to Daimler, will cover “civil and environmental claims regarding emissions control system,” in around 250,000 diesel-powered cars and vans in the US. The settlement may create something similar to the Environmental Mitigation Trust (EMT) created out of the Volkswagen side of the dieselgate scandal.

Quick Snapshot of the EMT

Many areas in the environmental industry have benefitted from funding from the VW settlement. The fund, known as the Environmental Mitigation Trust (EMT), has supported environmental projects such as building out EV charging infrastructure and electrifying or using fuels deemed to have lower carbon emissions than conventional diesel or gasoline fuel for school buses, shuttle buses, and transit buses.

For a span of 10 years, $2.9 billion from the VW settlement is funding environmental mitigation projects that reduce NOx emissions. This money is deposited in a trust and allocated among state beneficiaries. Some projects that qualified for funding from EMT:

• Class 4-8 school bus, shuttle bus, or transit bus replacement.
• Class 4-7 medium-duty truck replacement.
• Class 8 freight and drayage (port) trucks.
• Airport ground service equipment (electric only).
• Forklifts (electric only).

In Virginia, VW Settlement Funds paid for two electric cranes and electric drayage trucks. Virginia received $93.6 million in funds from the settlement and spent $14 million to help the Port of Virginia purchase the two electric container cranes and a few electric drayage vehicles that will move freight around the port.

In Louisiana, which was one of the first states in the country to implement and fund diesel emissions reduction projects under the VW settlement, the state received $19.8 million from the fund. The Louisiana Department of Transportation and Development is replacing old diesel equipment vehicles with a little over $6 million in VW funding. The Louisiana Department of Agriculture and Forestries is replacing 7 vehicles with $700,000 of funding. And almost $12 million went to help 16 Parish school boards that applied for funding.

Ascension Parish (a neighboring parish to mine) planned to buy 5 new school buses over the next year. The cost of these buses was $500,000 and would replace buses that couldn’t be repaired.

These are just a few examples of how states used the money from the VW fund. The settlement with Daimler may not have something similar, but there is a solid chance it will follow suit. If it does, there are many ways it will truly benefit us environmentally and health-wise.

Anyone with specific ideas for how funds should be allocated should get ready to lobby their respective state governments and overseeing agencies for the disbursement of funds.