Mercedes-Benz reaches $149.6 Mn settlement with US states over diesel emissions

Mercedes-Benz has agreed to pay $149.6 million to settle claims by US states over allegations that the automaker used illegal software to manipulate diesel emissions tests, bringing an end to its long-running diesel-related legal disputes in the United States.

The settlement, announced by New York Attorney General Letitia James on Monday, covers claims brought by 48 US states, Puerto Rico and the District of Columbia. Authorities alleged that Mercedes-Benz installed undisclosed software in certain diesel vehicles that reduced emissions during laboratory testing but allowed significantly higher pollution levels during real-world driving.

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Under the agreement, Mercedes will make payments to states and provide compensation to affected consumers. Eligible vehicle owners and lessees whose cars received approved emissions fixes will receive payments of $2,000 per vehicle. The company will also be required to cover the cost of installing emissions modification software, offer extended warranties and implement compliance measures aimed at preventing future violations.

Regulators said that in normal driving conditions, some vehicles emitted pollutants at levels far exceeding legal limits, in some cases by as much as 30 to 40 times. The settlement applies to an estimated 39,565 vehicles in the US that had not been repaired or permanently removed from service as of August 2023.

Mercedes said the agreement effectively resolves all remaining diesel-related legal issues in the United States. A company spokesperson said the settlement would not impact the group’s financial results, adding that adequate provisions had already been made to cover the costs.

As part of the deal, Mercedes must immediately pay $120 million to the participating states. An additional $29.6 million has been suspended and may be reduced depending on the number of vehicles the company repairs, removes from the road or repurchases.

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The agreement is subject to final court approval. The state-level settlement follows a separate $2.2 billion agreement reached in 2020 between Mercedes-Benz and US federal authorities, which resolved criminal and civil investigations and claims from approximately 250,000 vehicle owners.

The investigation into Mercedes began in the wake of Volkswagen’s diesel emissions scandal, which erupted in 2015 and ultimately cost VW more than $20 billion globally. Several automakers continue to face legal challenges tied to diesel emissions, and Mercedes is also among manufacturers facing ongoing litigation in other jurisdictions, including a mass lawsuit in the UK.