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Daimler reached an agreement this week to settle U.S. proceedings related to an investigation into software that’s presumed to cheat diesel emissions tests. While not an admission of guilt, it’s going to cost the company a sizable $1.5 billion — which is a lot to spend on a simple misunderstanding.
After Volkswagen Group admitted to using engine management software designed to falsify emission testing data, there has been a target panted on the back of every other company operating within the auto industry. If VW could get away with such shenanigans for years, there’s reason to believe other carmakers may have engaged in similar behaviors.
Realists know this goes without saying. Increasingly stringent pollution regulations (especially on diesel motors) have become difficult for even the largest players to contend with, and are one of the reasons so many startups are focused entirely on building electric cars — stock market madness being the other.
Meanwhile, the automotive sector has enjoyed a long and storied history of acting badly, then shrugging it off. We couldn’t possibly count the number of times companies knowingly released bum components and then did everything in their power to avoid a recall, or fibbed on their mpg figures.
It’s just the way things are done. But that doesn’t mean everyone gets away with it.
“With the proposed settlements, the company takes an important step towards legal certainty with respect to various diesel proceedings in the United States,” Daimler said in a release on Thursday.
That’s nothing compared to what Volkswagen spent on Dieselgate — a sum that is bearing down on $40 billion USD after five years of litigation. But the Mercedes-Benz parent may not be out of the woods just yet. Daimler is already estimating an additional sum “of a mid three-digit-million [euro] amount to fulfill requirements of the settlements.”
It also expects a corresponding impact on the free cash flow of the business over the next 3 years. The brunt of this damage is expected to take place within the next 12 months, however.
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