Volvo Group Takes $776 Million Charge for Emission Control Issue

January 04, 2019 by Alan Adler, @AlanAdler

Volvo Group is taking a $776 million charge against fourth-quarter earnings to cover costs related to an emission-control component in its heavy-duty trucks that is degrading faster than expected.

The money will be used for eventual recalls and replacement of the faulty component, which allows excessive nitrogen oxide emissions. Volvo said it is testing affected engines and conducting statistical analysis of the component in the trucks’ catalytic converters.

“The next step will be to define how to implement corrective actions,” Volvo said in a statement.

The U.S. Environmental Protection Agency and the California Air Resources Board said in October 2018 that they had been in discussions with Volvo about how to address the issue.

Volvo said the issue does not affect safety or performance apart from vehicle emissions.

‘Materials issue’

“The degradation is a result of a materials issue that occurs over time,” the company said. “All engines and vehicles equipped with the component met emissions limits at delivery.”

Volvo said it may take further charges against earnings depending on how wide-reaching the issue is found to be. The company did not say how many vehicles may be involved.

Separately, Cummins Inc. took a $181 million charge Aug. 1 against second-quarter earnings to cover the cost of a recall involving 500,000 engines that had a degrading catalyst.

Neither the Volvo nor Cummins issues were related to a device used to fuel emissions tests like those used in Volkswagen’s passenger cars with diesel engines that were sold in the U.S., the Air Resources Board said.

Read Next: Diesel Rolls on Despite Record Cummins Emissions Recall

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