Daimler Ready to Fight Cheating Accusations as Probe Widens

(Bloomberg) -- Daimler AG said it will push back against allegations that it manipulated emissions in its Mercedes-Benz engines, as a German government probe into the luxury-car maker deepens.

“We would employ all legal means” to defend against any accusation by the Federal Transport Motor Authority of an illegal defeat device in Mercedes-Benz cars, the company said in an emailed statement. Daimler was responding to an article in Der Spiegel magazine which said government examiners suspect that such a device was built into some vehicles.

Daimler’s statement comes a day after top executives were summoned for a special meeting to Berlin to discuss an ongoing probe into the carmaker’s engines, and hours after the German government said it would expand its examination to include additional models.

The motor transport authority, or KBA, which is also looking into potential emissions violations at other carmakers, will oversee these additional tests, Transport Ministry spokesman Ingo Strater told reporters in Berlin on Friday. On Thursday, details emerged that two engines used in Daimler’s Mercedes-Benz cars were being scrutinized by Stuttgart prosecutors as part of an investigation they opened in March.

“The KBA is testing vehicles from Daimler, just as it has done with other manufacturers in the past,” Strater said.

Daimler stock fell 0.8 percent to 64.66 euros as of 4:23 p.m. in Frankfurt, heading for its steepest decline this month. The stock has dropped 8.5 percent this year in the worst performance on Germany’s benchmark DAX Index, valuing the Stuttgart-based carmaker at 69.2 billion euros ($79.3 billion).

Germany’s scrutiny of Daimler deepens concerns that defeat devices used to cheat on emissions tests were used more widely than initially thought. Volkswagen AG was the first manufacturer to be caught, admitting in September 2015 that it used the technology in about 11 million cars.

Engines Scrutinized

At Daimler, German prosecutors are focused on two diesel motors built between 2008 to 2016 that are used across Mercedes’s product lineup, according to a person familiar with the investigation. Details about the engines in question were contained in a search warrant used to conduct raids at Daimler sites in May. 

“For us, the discussion was a continuation of the constructive dialog with the KBA,” Daimler said Friday. “Of course we will continue to work constructively with the authorities.”

German automakers last year agreed with authorities on a voluntary fix involving 630,000 cars to upgrade emissions control setups. The Transport Ministry said in a statement following the Friday press briefing that Daimler doesn’t face a recall and that the manufacturer was cooperative and agreed to the KBA’s checks.

After the revelation of the new details, South Korea’s environment ministry started a probe into some imported Mercedes vehicles, Yonhap news agency reported. The ministry found about 40 types of cars suspected of carrying a device manipulating emissions and is investigating how many of the vehicles have been sold in the country, according to unidentified official.

“It’s quite disconcerting that this investigation is happening and the accusations are serious,” Baden-Wuerttemberg state Transport Minister Winfried Herrmann told Deutschlandfunk radio. “We need unreserved clarification of the whole process and responsibilities.”

Thursday’s meeting at the federal Transport Ministry included Daimler’s head of technology development, Ola Kaellenius, who reiterated that the company complied with existing rules, according to a ministry statement. EU emissions rules allow for carmakers to reduce the degree to which exhausts are treated, if deemed necessary to protect the engine in tough driving conditions like low temperatures or high altitude.

Loose Regulations

While reports of 1 million Mercedes diesel cars at risk of decommissioning because of emissions violations “look bad,” according to a note from Citigroup analyst Mike Tyndall, they’re not “a new development as such, and we take comfort from Daimler’s continued assertion that its vehicles comply with the relevant, albeit somewhat loose, regulations.”

As part of its efforts to clear up mounting questions about the reliability of emissions controls in diesel cars, the Transport Ministry is due to meet manufacturers on Aug. 2 to discuss steps to clean up older vehicles, including software updates. A number of cities, including the hometowns of BMW AG and Daimler, have considered banning older diesel cars.

KBA has also looked into potential emissions violations at Volkswagen’s Audi, Fiat Chrysler Automobiles NV and General Motors Co.’s Opel.

To contact the reporters on this story: Elisabeth Behrmann in Munich at ebehrmann1@bloomberg.net, Chad Thomas in Berlin at cthomas16@bloomberg.net.

To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Dalia Fahmy, Chad Thomas