Volvo ordered to pay €55 million in engine emission case

By Helen Wright22 July 2014

Manufacturer Volvo Group has been ordered to pay SEK508 million (€55 million) in penalties and interest following a dispute with the US Environmental Protection Agency (EPA) over the emissions compliance of some of its diesel engines.

Volvo Group said the decision was expected to reduce its third quarter operating income by around SEK440 million (€47.6 million). The manufacturer had already accounted for the remaining SEK68 million (€7.35 million).

The US Court of Appeals for the District of Columbia Circuit upheld a District Court ruling that 2005 model Volvo Penta engines violated a legal agreement over emissions compliance.

According to legal documents, the dispute has its roots in 1999, when Volvo Truck Corporation and Volvo Construction Equipment entered into an agreement known as a consent decree with the EPA.

This agreement came about because the EPA had alleged that several major engine manufacturers had violated federal law by equipping certain engines with “defeat devices” designed to suppress emissions during EPA tests, even though emissions exceeded the legal limit in normal operating conditions.

As part of the settlement of these allegations, the manufacturers agreed to satisfy future EPA emissions standards ahead of schedule. This meant that Volvo Group and others agreed to adhere to new, stricter emissions legislation in the US for some engines from 1 January, 2005 – a year earlier than the emissions laws were due to come into effect.

However, the EPA alleged that some engines manufactured by Volvo Penta – part of Volvo Group – during 2005 did not adhere to the 2006 emissions laws. Volvo Group argued that the agreement did not apply to the Volvo Penta engines, and the dispute went to the District Court.

In the wake of the US Court of Appeals’ decision, Volvo Group said it would consider whether to launch a further appeal.

A spokesperson for the manufacturer declined to comment.

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