Dieselgate to cost Daimler additional €1.5 billion
January 22, 2020
Daimler will need over a billion euros on top of the €1.6 billion it already set aside to cope with the fallout of an emissions cheating scandal. Legal disputes and car recalls caused the firm's profits to fall in 2019.
The Stuttgart-based maker of Mercedes-Benz said in a statement that it expects its earnings before interest and taxes (EBIT) to amount to €5.6 billion for 2019.
That figure does not include the "anticipated additional expenses for ongoing governmental and court proceedings and measures relating to Mercedes-Benz diesel vehicles," the company said.
Daimler estimated that the additional costs for covering legal disputes and massive car recalls would cost the company between €1.1 billion to €1.5 billion.
Those estimates come on top of the €1.6 billion that the company set aside for the scandal last year.
Dieselgate: A timeline
VW's emissions scandal plunged the automaker into its deepest crisis ever. It brought with it everlasting damage to VW's reputation and massive fees and penalties — not to mention compensation claims from car owners.
Image: picture-alliance/dpa/J. Stratenschulte
The disaster unfolds — September 2015
About two weeks after Volkswagen admitted behind closed doors to US environmental regulators that it had installed cheating software in some 11 million of its diesel vehicles worldwide, the Environmental Protection Agency shared that information with the public. It was September 18, 2015. The ensuing crisis would eventually take a few unexpected turns.
Image: picture-alliance/dpa/O. Spata
The boss must go, long live the boss — September 2015
Volkswagen's then-CEO Martin Winterkorn (above) had little choice but to step down several days after news of the scandal broke. In September 2015, he tendered his resignation, but retained his other posts within the Volkswagen Group. Winterkorn's successor was Matthias Müller. Until taking the reins at VW, Müller had been the chairman at Porsche, a VW subsidiary.
Image: picture-alliance/Sven Simon
Raiding headquarters — October 2015
Regulators in the US weren't the only ones investigating VW. Authorities in Lower Saxony, the German state in which VW is based, were also scrutinizing the company. On October 8 2015, state prosecutors raided VW's headquarters along with several other corporate locations.
Image: picture-alliance/dpa/P. Steffen
Hell breaks loose — January 2016
On January 4, 2016, the US government filed a lawsuit against VW in Detroit, accusing the German automaker of fraud and violations of American climate protection regulations. The lawsuit sought up to $46 billion for violations of the Clean Air Act.
Image: picture-alliance/dpa/A. Burgi
Quit or forced out? — March 2016
In March 2016, the head of VW in the US, Michael Horn, resigned. In the initial days and weeks after the scandal broke, he was the one US authorities turned to for information. He issued an official apology on behalf of the automaker, asking for the public's forgiveness.
Image: Getty Images/C. Somodevilla
Settlement — October 2016
On October 25 2016, a US judge approved a final settlement that would have VW pay $15.3 billion. In addition, affected cars would be retrofitted with better, non-deceptive hardware and software, or else VW would buy them back completely from customers.
Image: picture-alliance/dpa/P. Pleul
Imitators — July 2017
When dieselgate first emerged in 2015, analysts said it was likely other car makers were also cheating tests. But it wasn't until 2017 that other companies were targeted in probes. In July, German authorities launched investigations into luxury car makers Porsche and Daimler for allegedly cheating emissions tests. Others, such as Audi and Chrysler, have also been hit by similar allegations.
Image: picture-alliance/dpa/F. Kraufmann
Public still supportive — December 2017
Despite dieselgate, VW has managed to keep the emissions scandal from utterly tarnishing its image. According to several polls, between 55 to 67 percent of Germans continue to trust the automaker. In the US, polls show that roughly 50 percent still believe the German company produces worthwhile vehicles.
Image: picture-alliance/dpa/C. Klose
Fuming over monkeys — January 2018
In late January, however, VW suffered another heavy blow over reports that the company experimented on monkeys and made the animals inhale diesel fumes. To make matters worse, a separate experiment that had humans inhale relatively harmless nitrogen dioxide was revealed at the same time. Some media wrongly interpreted this to mean humans were also inhaling toxic fumes.
Image: picture-alliance/dpa/F. Gentsch
Canadian court demands millions — January 2020
Years after the scandal that caused Volkswagen to pay CAN$2.4 billion (US$1.83 billion), a court in Toronto order a further fine of CAN$196.5 million. Volkswagen pleaded guilty of violating in environmental laws. Prosecutor Tom Lemon noted that the fine was "26 times the highest fine ever for a Canadian environmental offence."
Image: picture-alliance/dpa/R. Knipping
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Operating profit plummets
The extra costs for covering the fallout of the emissions cheating scandal mean that the 2019 results would fall below earnings expectations.
The figure is a steep drop from the €11.1 billion operating profit it made in 2018.
News of Daimler's preliminary figures hit the company's stock on the blue-chip DAX index in Frankfurt on Wednesday morning, falling by 0.5% to €46.18 even as the DAX, overall, hit a record high.
Germany's motor vehicle authority KBA ordered a recall on almost 1 million Daimler vehicles, although the company insists that none of the "motor control functions" are illegal.
In a bid to save €1.4 billion by 2022, Daimler's board chairman Olla Källenius has been pursuing a cost-cutting program. The company plans to already cut 10,000 jobs as well as cap investment.
German car giants Volkswagen, Daimler and others have been accused of violating environmental regulations and manipulating software to make emissions from diesel vehicles lower in tests than they actually are on the road.
Dieselgate erupted in September 2015 when Europe's biggest carmaker Volkswagen admitted to installing "defeat devices" in 11 million vehicles worldwide that allowed them to cheat emissions testing.