U.S. Lawsuit

Daimler Accused of Emissions Tricks

dieter zetsche feb 11 2016 bochum symposium source bloomberg
The Daimler CEO Dieter Zetsche on February 11 at an auto industry symposium in Bochum, Germany. A U.S. class-action specialist on Thursday sued Daimler, saying it used trickery to falsify emissions on 14 car and SUV models that use its patented BlueTec diesel technology. Daimler called the suit's allegation "unfounded.''
  • Why it matters

    Why it matters

    Daimler could be forced to pay settlements if it is proven guilty of having manipulated emissions values.

  • Facts

    Facts

    • The lawsuit against Mercedes was filed five months after VW admitted it had manipulated emissions values with software and other technology on about 11 million diesel cars worldwide.
    • U.S. law firm Hagens Berman led negotiations with Toyota in 2013, when the Japanese carmaker agreed to pay buyers $1.6 billion for models that accelerated unintentionally.
    • Lawyer Steve Berman in 1998 was the special assistant district attorney who represented 13 U.S. states that eventually obtained $206 billion (€184 billion) from tobacco maker Philip Morris in the largest ever civil settlement.
  • Audio

    Audio

  • Pdf

A U.S. law firm is suing Mercedes-Benz owner Daimler, alleging the luxury automaker used cheat software to rig emissions values on 14 models of cars and SUVs that use the company’s BlueTEC low-emission diesel technology.

The suit filed Thursday in U.S. District Court in New Jersey alleges that Stuttgart-based Daimler employed similar software tricks as German rival Volkswagen to falsify results on diesel engines to trick U.S. regulators.

Daimler shares plunged up to 4 percent in Frankfurt and were trading down 1.8 percent at €63.53 at noon in Berlin. The automaker in a brief statement called the allegations “unfounded” and said it would fight the lawsuit.

 

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”Investors are nervous when they learn of something like this,” said Sascha Gommel, analyst at Commerzbank in Frankfurt. “At VW, many investors were caught by surprise and hadn’t expected what happened. This is a protective measure so that they can’t be surprised again.”

“(It) could lead to high costs if manipulation is truly proven to have taken place.”

Frank Schwope, Analyst, bank Nord LB

The suit alleges that Daimler’s BlueTec low-emissions technology, the cornerstone of its line of top-performing diesel luxury sedans and SUVs, uses trickery, not engineering, to meet U.S. environmental standards.

“It appears that Mercedes has been caught in a similar scheme as Volkswagen and programmed these BlueTEC vehicles to pollute, all the while reaping profits from those who have fallen victim to its aggressive and deceptive eco-conscious branding,” said Steve Berman, the managing partner of Hagens Berman, a class-action law firm.

Mr. Berman in 1998 was the special assistant district attorney who represented 13 U.S. states that eventually obtained $206 billion (€184 billion) from tobacco maker Philip Morris in the largest ever civil settlement.

The case, which relied on testimony of whistleblowers, led to advertising and marketing restrictions on U.S. tobacco makers.

Analysts said Daimler faced real legal risk in the United States, where court awards and settlements tend to be much larger than in Europe.

”This certainly is a risk, because the suit has been filed in the United States. Law suits are less harmful in Germany, but those in the United States could lead to high costs if manipulation is truly proven to have taken place,” Frank Schwope, an analyst at Nord LB bank in Hanover, said.

Mr. Schwope said it was too early for Daimler to set money aside for a possible settlement in the United States. “It is too early to say and Daimler has always said it did not manipulate. One has to assume this is the case as long as the company maintains this,” Mr. Schwope said.

Mr. Gommel from Commerzbank said he did not see a financial risk — for now.

The lawsuit against Mercedes was filed five months after VW admitted it had manipulated emissions values with software and other technology on about 11 million diesel cars worldwide.

The scandal has thrown Volkswagen, Germany’s largest listed company, into an existential crisis and exposed the automaker to billions in potential fines, penalties and associated costs.

The suit against Daimler, if ultimately borne out, would threaten the reputation of German business and the auto industry’s low-emissions diesel technology, which it has used to remain competitive in Europe and abroad.

 

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In Volkswagen’s Dieselgate scandal, VW, Audi, Porsche, Seat and Skoda diesel models were found to emit higher levels of nitrogen oxide than legally allowed. VW has lost more €16 billion, or $17.8 billion, in market value since the scandal emerged last September.

The lawsuit against Daimler alleges that Mercedes too is violating U.S. environmental regulations. The suit said that higher emissions levels than advertised were observed in the following Mercedes diesel models: ML 320, R320, S-Class, ML 350, E-Class, GLK Class, GL 320, GL Class, GLE Class, E320, ML Class, Sprinter, S350 and the R Class.

Daimler has advertised its BlueTEC emissions technology as “the world’s cleanest and most advanced diesel” with “ultra-low emissions, high fuel economy and responsive performance” that emits “up to 30% lower greenhouse-gas emissions than gasoline.”

BlueTec, which Daimler introduced in 2006 on some Mercedes diesels, uses a patented system of particulate and exhaust filters, coupled with a tank of water and urea that is injected into the exhaust stream at high combustion levels to precipitate out and reduce nitrogen oxide levels to meet standards.

The U.S. law firm said independent testing did not bear out Daimler’s claim that BlueTec was effective.

“Real world testing has recently revealed that these vehicles emit dangerous oxides of nitrogen (NOx) at a level more than 65 times higher than the United States Environmental Protection Agency permits,” the lawsuit alleged. “The Mercedes “Clean Diesel” turns out to be far from ‘clean,’” according to the lawsuit.

Daimler, headquartered in Stuttgart, was not immediately available to comment when contacted by Handelsblatt Global Edition on Friday morning.

U.S. law firm Hagens Berman filed the class action suit on behalf of Ulyana Lynevych, the owner of Mercedes ML 350 SUV.

A class action suit filed by Mr. Berman, the firm’s managing partner, prompted negotiations that led Toyota to eventually pay buyers $1.6 billion in 2013 for models that accelerated unintentionally.

In the Mercedes case, Mr. Berman is asking Daimler to start a recall or a free replacement program and offer compensation for the lost value of affected Mercedes cars.

The lawsuit came as Daimler published its 2015 annual report on Friday, which showed that its chief executive, Dieter Zetsche, earned €9.7 million last year, 16 percent more than in 2014. Mr. Zetsche, whose contract was extended on Tuesday by three years to the end of 2019, last year was the best-earning chief executive of the 30 managers leading a German blue chip, Reuters reported, citing a study from consultancy HKP.

 

Kevin O’Brien is editor in chief of Handelsblatt Global Edition. Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. To contact the authors: obrien@handelsblatt.com and kreijger@handelsblatt.com

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