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Mercedes-Benz fined $1.5 billion for emissions cheating

Automaker Daimler AG and subsidiary Mercedes-Benz USA have agreed to pay $1.5 billion to the U.S. government and California state regulators to resolve allegations they cheated on emissions tests, officials said Monday.

The U.S. Department of Justice, Environmental Protection Agency and the California attorney general's office said Daimler violated environmental laws by using so-called "defeat device software" to circumvent emissions testing. In doing so, the companies sold roughly 250,000 cars and vans between 2009 and 2016 with diesel engines that didn't meet state and federal standards.

The settlement, which includes civil penalties and still awaits court approval in Washington, will require Daimler to fix the already sold vehicles.

Daimler AG must repair at least 85% of the affected cars within two years and at least 85% of the affected vans within three years, justice department officials said. The company must also offer extended warranties to drivers on certain vehicle parts and conduct emissions tests on the repaired vehicles each year for the next five years. 

"By requiring Daimler to pay a steep penalty, fix its vehicles free of charge, and offset the pollution they caused, today's settlement again demonstrates our commitment to enforcing our nation's environmental laws and protecting Americans from air pollution," said Deputy Attorney General Jeffrey Rosen in a statement.

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A separate class action civil settlement will bring a one-off charge of about $700 million, Daimler AG said. In a statement, the company also said settling the emissions allegations means Daimler does not admit any liability nor will the company have to buy back any of the vehicles in question.

Daimler AG didn't make it clear just how the vehicles would be cleaned up or whether it was accused of any wrongdoing like Volkswagen, which paid $2.8 billion to settle a criminal case that arose from cheating on emissions tests. Fiat Chrysler also is being investigated for allegedly cheating on emissions.

VW admitted that it turned on pollution controls when vehicles were being tested in EPA labs, then turned them off when the diesel vehicles were on real roads. VW duped the EPA for years before its scheme was discovered by a nonprofit and researchers at West Virginia University.

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As part of Daimler AG's settlement, officials in California will receive $17.5 million for future environmental enforcement.

"Installing defeat device software on your vehicles to deceive emissions regulators doesn't qualify as doing more," said California Attorney General Xavier Becerra in a statement. "It just means you'll pay more in penalties once we catch you. And we will, because cheaters really aren't as smart as they think."

Daimler AG's pollution practices also are under investigation in Germany, where civil lawsuits claim the vehicles emit more pollutants than advertised.

In April 2016, the justice department asked Daimler to conduct an internal probe into its exhaust emissions certification process. The request came as the EPA began checking all diesel engines after the VW cheating was revealed.

Steve Berman, a Seattle attorney who sued Daimler over Mercedes diesel pollution, said in 2016 his firm hired a company to test Mercedes diesels on real roads, finding that they spewed out too much nitrogen oxide almost all the time. Berman accused Mercedes of having software called a "defeat device" that was similar to VW.

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