Mercedes-Benz maker probes diesel emissions

Elisabeth Behrmann
Bloomberg News

Daimler AG’s diesel-engine emissions came under scrutiny after the carmaker was asked by the U.S. Department of Justice to investigate the certification process of its cars.

The maker of Mercedes-Benz vehicles said it’s cooperating fully with authorities and that a U.S. class action lawsuit alleging some of its cars violated emissions standards, prompting the government’s request, is “baseless.” The stock dropped the most in more than three months in Frankfurt.

The investigation casts a further cloud over Daimler as the automaker got off to a slow start with an 8.5 percent drop in first-quarter earnings. Car-pollution levels are being more closely monitored around the world following diesel cheating at Volkswagen AG, which is expected Friday to release additional details on the billions of euros in fees and fines it faces as a result of the scandal.

“The investigation may be procedural, following the class-action suits filed against Daimler about their diesel technology not working properly,” said Sascha Gommel, a Frankfurt-based analyst with Commerzbank AG. “In any event, it’s unlikely to be an issue on the scale of Volkswagen.”

Daimler has been under pressure after a Mercedes owner in Illinois filed suit two months ago. The suit, followed by similar ones, alleges Mercedes-Benz clean-diesel models contain a device that causes the vehicles to violate U.S. emissions standards when run at cooler temperatures, making them less environmentally friendly than advertised. Specifically, the allegation claims the automaker uses a device in its BlueTec cars to turn off a system meant to reduce polluting nitrogen oxides in its exhaust. U.S. authorities asked Daimler to investigate on April 15.

Daimler said it will probe “possible indications of irregularities and of course take all necessary actions.” The U.S. Environmental Protection Agency also contacted the company earlier this year over the allegations, which Daimler Chief Executive Officer Dieter Zetsche rejected in February as without merit. While Daimler has acknowledged the existence of a device, it says it’s legal and designed to protect the engine.

Daimler is in the process of appointing a law firm to help with the internal probe and coordinate cooperation with the Department of Justice, Chief Financial Officer Bodo Uebber said Friday on a conference call. He declined to say whether other U.S. authorities such as the EPA and California Air Resources Board were part of the checks.

German authorities will also present results Friday of a broader survey into cars that pollute more on the road then they do in the lab. Meanwhile, Mitsubishi Motors Corp. admitted this week that it manipulated fuel-economy tests, and PSA Group said late Thursday that its premises in France were searched by government fraud investigators.

The investigation comes as Daimler’s earnings before interest and taxes from ongoing business declined to 2.68 billion euros ($3.03 billion) in the first quarter from 2.93 billion euros a year earlier, due to the cost of rolling out an upgraded version of the Mercedes E-Class sedan. The company forecast in early April that profit growth will revive later this year as more customers buy the E-Class, the luxury division’s most important model. The new version came out in March.

Mercedes is poised to overtake BMW as the world’s biggest maker of luxury cars. The return on sales at the Mercedes-Benz Cars unit, which also includes the Smart city-car brand, narrowed to 7 percent in the quarter from 9.4 percent a year earlier.