In a significant legal development impacting the automotive industry, Mercedes-Benz, a subsidiary of German automaker Daimler AG, has reached a proposed settlement with U.S. regulators over alleged violations of the Clean Air Act. The U.S. Department of Justice, alongside the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), announced the settlement, addressing claims of emissions cheating in Mercedes-Benz diesel vehicles sold in the United States between 2009 and 2016.
The proposed agreement, filed with the U.S. District Court for the District of Columbia, mandates that Mercedes Daimler Benz undertake a comprehensive recall and repair program for affected diesel vehicles. Furthermore, the company is set to pay a substantial $875 million in civil penalties, alongside approximately $70.3 million in additional penalties. This financial burden is part of a broader settlement package designed to rectify the environmental damage and deter future misconduct.
Beyond the financial penalties, Mercedes Daimler Benz is obligated to extend warranty coverage for specific components in the repaired vehicles. The settlement also necessitates the implementation of projects aimed at mitigating the excess nitrogen oxides (NOx) emissions, a key component of smog, generated by the affected vehicles. To prevent recurrence, Daimler is required to institute enhanced internal audit procedures. The recall program and the federal mitigation project are estimated to cost the company around $436 million. An additional $110 million is earmarked for mitigation projects specifically within California. The total value of this comprehensive settlement is estimated to be approximately $1.5 billion, marking a significant financial and operational undertaking for Mercedes Daimler Benz.
Under the Clean Air Act and associated federal regulations, automobile manufacturers must obtain a certificate of conformity from the EPA before introducing new model year vehicles into the U.S. market. This certification process requires manufacturers to demonstrate, through rigorous testing, that their vehicles meet established emissions standards. Crucially, manufacturers are also legally bound to disclose all Auxiliary Emission Control Devices (AECDs) and any defeat devices incorporated within the vehicle’s emission control systems to the EPA.
The legal actions leading to this settlement stem from civil complaints filed by both the United States and CARB. These complaints allege that, between 2009 and 2016, Mercedes Daimler Benz manufactured, imported, and sold over 250,000 diesel Sprinter vans and passenger cars equipped with undisclosed AECDs and defeat devices. These sophisticated devices were integrated into the vehicles’ complex emissions control software. The purpose of these devices was to ensure compliance during standard emissions testing. However, under normal driving conditions, when not undergoing testing, the vehicles’ emissions controls operated less effectively, leading to a significant increase in NOx emissions exceeding legal limits.
Nitrogen oxides (NOx) are critical pollutants contributing to the formation of ground-level ozone, a major component of smog. Exposure to ozone poses significant risks to human health. Scientific studies have linked ozone inhalation to potential damage to lung tissue, particularly in children and adults, and the exacerbation of respiratory conditions such as asthma, emphysema, and bronchitis. Furthermore, NOx pollution has been associated with cardiovascular diseases, underscoring the serious public health implications of emissions violations.
“By imposing a substantial penalty on Daimler, mandating the free repair of affected vehicles, and requiring offsets for the pollution caused, this settlement underscores our unwavering commitment to enforcing environmental laws and safeguarding Americans from air pollution,” stated Deputy Attorney General Jeffrey Rosen.
EPA Administrator Andrew Wheeler emphasized the agency’s stance: “The message conveyed today is unequivocal. We will enforce the law rigorously. We are dedicated to protecting both the environment and public health. Attempting to circumvent the system and mislead the public will result in detection, and those who betray public trust for profit will face significant consequences.”
The discovery of these defeat devices by the EPA and CARB was a direct result of enhanced testing protocols implemented following the Volkswagen emissions scandal. These tests were conducted at the EPA’s National Vehicle and Fuel Emissions Laboratory in Michigan and CARB’s testing facility in El Monte, California.
The settlement mandates that Mercedes Daimler Benz implement a comprehensive recall and repair program. This program is designed to remove all defeat devices from the affected vehicles and ensure full compliance with Clean Air Act emissions standards. These repairs will be conducted at no cost to consumers. The repair process will involve software updates and, depending on the specific model and model year, the replacement of certain hardware components.
Mercedes Daimler Benz is obligated to repair at least 85 percent of the affected passenger cars within a two-year timeframe and 85 percent of the affected vans within three years. To further ensure long-term compliance, the company must provide an extended warranty covering all updated software and hardware. For the subsequent five years, Mercedes-Benz is required to conduct annual testing of the repaired vehicles to verify continued adherence to emissions standards. Failure to meet these standards for any category of repaired vehicles or failure to achieve the 85 percent recall rate for either passenger cars or vans will result in significant financial penalties for Daimler.
Beyond vehicle repairs and penalties, the settlement demands systemic corporate reforms within Daimler to proactively detect and prevent future violations. These reforms include rigorous testing of new diesel and gasoline vehicles using Portable Emissions Measurement Systems (PEMS) to evaluate real-world emissions performance. Daimler is also mandated to establish a robust whistleblower program, enhance annual training for employees on AECDs and defeat devices, and conduct internal audits under the scrutiny of an external compliance consultant.
As part of the environmental mitigation efforts, Daimler is also required to replace 15 older, high-polluting locomotive engines with new engines that incorporate significantly cleaner emissions technologies. This initiative is intended to offset a portion of the excess NOx emissions generated by the affected vehicles.
The proposed settlement is now subject to a 30-day public comment period, followed by court review and final approval. The consent decree documents are publicly accessible, and further details regarding the settlement are available on the EPA website. This settlement marks a crucial step in holding automotive manufacturers accountable for emissions compliance and reinforces the commitment to environmental protection and public health within the automotive sector, particularly concerning Mercedes Daimler Benz and its adherence to regulatory standards.
