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02/21/2019

08:58 AM

New German probe

Daimler may face hefty Dieselgate fine

By: Franz Hubik

Prosecutors have launched penalty proceedings against Daimler in the diesel scandal. VW had to pay a €1 billion fine in a similar case.

DPA

Still cleaning up its act.

The Stuttgart state prosecutor’s office has opened a case against Mercedes-Benz's parent company Daimler over alleged neglect by executives in the diesel scandal.

VW paid €1 billion ($1.14 billion), and its luxury unit Audi €800 million, in similar cases. Proceedings are also underway against Porsche and auto components group Bosch.

Criminal proceedings have already been launched against individual Daimler employees. They date back to early 2017 and target people accused of involvement in the alleged use of illegal software to permit excess emissions.

The law doesn’t allow criminal cases against corporate entities. The penalty proceedings announced on Wednesday are new and aimed at the group as a whole.

Daimler said it was cooperating with authorities. Based in Stuttgart, which is also home to Porsche and Bosch, the company declined further comment. It’s unclear how high a possible fine against Daimler could be.

Denies 'illegal' devices

The Federal Motor Transport Authority (KBA) has ordered Daimler to recall 700,000 Mercedes cars across Europe, including 280,000 in Germany for software alterations to remove alleged defeat devices. Daimler launched the updates last fall, but denies that the existing functions are illegal and has lodged an appeal against the KBA’s decision.

The company had announced in summer it would update the software in 3 million diesel cars to reduce their nitrogen oxide emissions. They include the 700,000 vehicles that are subject to the recall ordered by the KBA.

Summoned to Berlin: Diesel recall puts Daimler boss Zetsche in the hot seat

Summoned to Berlin

Diesel recall puts Daimler boss Zetsche in the hot seat

Dieselgate threatens to engulf Daimler as thousands of Mercedes vans are recalled. Should the trickle turn into a flood, shareholders can expect collateral damage to the carmaker's profits.

US authorities have been investigating Daimler since 2016 because some of its diesel models emit more nitrogen oxide than permitted. The Department of Justice, the Environmental Protection Agency and the California Air Resources Board are probing whether Daimler illegally manipulated the exhaust-cleaning systems of its vehicles.

Daimler said in its 2018 annual report released last week that all cases against it could have a substantial financial impact and damage the company’s reputation.

The group last fall set aside a "medium-sized three-digit million euro sum" to cover legal risks from diesel-related litigation.

The diesel scandal erupted in September 2015 when VW admitted it had fitted defeat devices in cars to circumvent emissions tests.

Franz Hubik covers the auto industry and its relationship to government policy. David Crossland adapted this article into English for Handelsblatt Today. To contact the author: [email protected]

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