Germany’s Daimler AG, parent of Mercedes-Benz, said Thursday it has reached agreements in principle to settle regulatory and civil cases in the United States over cheating on diesel emissions tests for more than $2 billion, in a spinoff case sparked in part by the larger Volkswagen emissions scandal.


Key facts on the $2 billion settlement

  • The Daimler case involves emission control systems in about 250,000 diesel passenger cars and vans in the U.S.; the settlement would end a years-long battle with several federal and state agencies including the Environmental
  • Protection Agency, the California Air Resources Board, the California Attorney General’s Office, and U.S. Customs and Border Protection as well as a class action suit pending in the U.S. District Court for the District of New Jersey.
  • The settlement with U.S. agencies is expected to cost $1.5 billion, with the class action settlement adding an additional $700 million, the company said in a news release.
  • The company said it is moving forward with the proposed settlements, which still must be approved by the courts, “after weighing all aspects [for what’s] in the best interest of the company,” adding “with the proposed settlements, the company takes an important step towards legal certainty with respect to various diesel proceedings in the United States.”
  • The pacts resolve issues that arose after U.S. regulators stepped up examination of diesel emissions following Volkswagen’s cheating scandal that emerged in 2015.
  • Daimler insisted that its emissions technology complied with the rules and that its case was different from the cheating committed by its rival.
  • But a Seattle attorney who sued Daimler over Mercedes diesel pollution said in 2016 his firm hired a company to test Mercedes diesels on real roads, finding that they spewed out too much nitrogen oxide almost all the time; and his suit accused Mercedes of having software called a “defeat device” that was similar to VW’s, according to the Detroit News.

Key background on scandals in the auto industry

Dieselgate — the highly publicized scandal in which Volkswagen rigged software to try to hide its vehicles’ true emissions — had ripples throughout the auto industry. Wards Automotive estimates Volkswagen had to pay $33.6 billion in costs related to the cheating scandal. Last year, Volkswagen CEO Herbert Diess was accused by German prosecutors of failing to inform investors in time about the financial impact of the scandal. Scrutiny over emissions ensnared Daimler, which said last month its second-quarter revenue was off by 30%, due largely to the impact of coronavirus, but said sales of passenger vehicles were picking up. Daimler said it has “made sufficient provisions for the expected total costs of the settlements.”