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Daimler, the parent company of Mercedes-Benz, has reached a settlement for about $2.8 billion to settle civil and environmental claims about the company's diesel engine emissions control in about 250,000 vehicles in the United States. The agreement ends cases involving groups like the Environmental Protection Agency, California Air Resources Board, US Department of Justice, US Customs and Border Protection, and a class-action lawsuit.

This decision comes in three sections. The company is paying $1.5 billion to complete the cases with the various governmental organizations. Daimler expects settling the class-action lawsuit to be around $700 million. Finally, the automaker "estimates further expenses of a mid three-digit-million EUR amount to fulfill requirements of the settlements," according to its statement. Assuming that figure is 500 million euros ($5.9 million at current exchange rates), then this is an outlay of $2.79 billion.

Gallery: Mercedes Launches Three New Diesel Models (US)

Daimler will release the final amount to settle each section after filing binding consent decrees with the various agencies. This process should be complete by mid-September, Reuters reports.

It's not currently clear what, if anything, Daimler needs to do to address the Mercedes vehicles on the road in the US with this diesel engine emissions control equipment.

In the wake of Volkswagen's Dieselgate scandal, the Environmental Protection Agency became much more strict when evaluating diesel vehicles. This forced Mercedes to cancel plans of bringing the C300d 4Matic to the US. After that, the automaker decided not to bother certifying any of its diesel-fueled models in the country. 

Daimler already faced its own diesel emissions scandal in Europe. In 2018, the company had to recall 774,000 vehicles in Europe after Germany’s Federal Motor Transport Authority found five software methods of cheating emissions

Daimler has now taken its emphasis off developing new combustion engines in favor of focusing on electric propulsion.

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Daimler reaches agreements in principle to settle regulatory and civil proceedings in the United States regarding diesel emissions
Stuttgart (Germany), Aug 13, 2020
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.

Daimler AG and MBUSA 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.

The company has made sufficient provisions for the expected total costs of the settlements.

For the settlements with the U.S. authorities, Daimler expects costs of approx. USD 1.5 billion (approx. EUR 1.27 billion). The estimated cost of the class action settlement is approx. USD 700 million (approx. EUR 592 million) including the court’s anticipated award of attorneys’ fees and costs. In addition, Daimler estimates further expenses of a mid three-digit-million EUR amount to fulfill requirements of the settlements.

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.

Today, the Board of Management as well as the Supervisory Board of Daimler AG and Mercedes-Benz AG have approved the proposed settlements after weighing all aspects in the best interest of the company. With the proposed settlements, the company takes an important step towards legal certainty with respect to various diesel proceedings in the United States.

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. In the coming weeks, the authorities will then lodge the consent decrees with a U.S. District Court for ultimate approval. The U.S. consumer class action settlement will be submitted to the U.S. District Court for the District of New Jersey for approval.

Daimler informed capital markets about the agreements in principle to comply with disclosure requirements of the European Market Abuse Regulation (MAR).

Exchange rate EUR to USD as of August 13, 2020, 1 EUR = 1.183 USD.

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