Volvo Group to take SEK 7 billion charge over faulty emission controls

4 January 2019

Volvo Group announced that it makes a provision of SEK 7 billion (USD 780 million) in relation to estimated costs to address “degrading emission control component issue” in Volvo heavy-duty truck engines.

In October 2018, Volvo revealed an emission issue in its heavy-duty diesel engines, sold mostly in the North American and European markets, that may lead to increased in-use NOx emissions. The faulty emission component was not disclosed by Volvo, but it appears to be an SCR catalyst of insufficient durability. The affected engines met the applicable emission standards at the time of delivery, Volvo said.

Volvo estimated the costs based on testing of vehicles, statistical analysis, and dialog with relevant authorities. The next step will be to define how to implement corrective actions concerning the component in affected vehicles. This will be done together with the relevant authorities, Volvo said.

The provision will impact operating income in the fourth quarter of 2018, said Volvo, while the negative cash flow effect will start in 2019 and gradually ramp up in the coming years.

In July 2018, Cummins agreed to a voluntary recall of over 500,000 diesel trucks, after the California Air Resources Board found that the SCR catalyst in the affected engines had insufficient durability.

Johnson Matthey said in November 2018 that two customers had informed it about failures in engines that use its product, according to Bloomberg.

Source: Volvo