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March 4, 2024

Cummins to Pay $1.67 Billion in Record-Setting Clean Air Act Settlement

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Dec 23, 2023

Engine manufacturer Cummins has agreed to pay a staggering $1.67 billion civil penalty, the largest in American history, to settle allegations from the Department of Justice (DOJ) that the company cheated emissions tests for over 600,000 diesel pickup truck engines.

Background of the Emissions Defeat Device Scandal

The claims against Cummins stem from a multi-year investigation into whether the company deliberately sold heavy-duty pickup truck engines that emitted higher amounts of nitrogen oxide (NOx) pollutants during real-world driving compared to emissions test conditions.

Prosecutors say Cummins manufactured and sold the 6.7-liter turbo diesel engines from model years 2014-2019 while knowing that the vehicles did not meet emissions standards. The engines were installed in popular Ram 2500 and 3500 heavy-duty pickups.

By ensuring the trucks passed laboratory emissions tests but spewed out excess NOx under normal driving situations, Cummins allegedly violated the Clean Air Act’s prohibition on “defeat devices” – technology configured to reduce emissions controls when not undergoing official testing.

The use of similar defeat devices by Volkswagen in 2015 sparked public ire and resulted in criminal charges against multiple executives. The unfolding Cummins scandal hearkens back to “Dieselgate” and seems poised to become major news in the auto industry.

Details of the Civil Settlement

Announcing the tentative agreement on Thursday, prosecutors portrayed the fine as a resounding message that cheating emissions requirements will bring severe consequences.

“Cummins chose profits over people and pollution when it deliberately developed and sold 675,000 heavy duty diesel trucks that spewed smog and particulates into the air we breathe,” said one DOJ official.

In addition to the civil penalty, Cummins has agreed to extend the emissions warranties on the affected vehicles, carry out projects to mitigate excess pollution, and take specific actions to prevent future violations.

The company will pay $200 million to the National Parks Service and other federal land managers to fund environmental projects offsetting NOx emissions.

Nearly $150 million will go towards replacing old school and transit buses across the country with newer vehicles featuring updated emissions control equipment.

And Cummins is required to carry out enhanced test procedures and conduct in-use compliance audits to guarantee its engines meet emissions standards going forward.

Costs and Reactions

Accepting responsibility for failing to ensure the pickup truck engines complied with regulations, Cummins CEO Tom Linebarger apologized and framed the issue as an unfortunate mistake rather than intentional deception.

Still, the company says it will book an estimated $2 billion pretax charge in Q4 2022 reflecting the settlement costs. Given Cummins’ total 2021 revenues topped $24 billion, the penalty payment seems unlikely to severely impact operations. But it does add uncertainty during an already-challenging economic environment.

Investors reacted negatively to news of the settlement, pushing Cummins’ stock price down over 3%, though shares largely recovered initial losses after Linebarger held a conference call reassuring shareholders.

And at least one analyst thinks the finality of resolving the claims will reduce uncertainty plaguing Cummins stock over the past year as speculation mounted about potentially huge regulatory fines.

“We…think putting this issue in the rearview mirror should relieve a key overhang for the shares,” a Barclays report noted.

What’s Next in the Ongoing Saga

The tentative consent decree between federal regulators and Cummins must still receive court approval before becoming legally binding. A public comment period will allow those affected to weigh in on the settlement terms.

And while Cummins may be ready to move on, the environmental impacts will persist. The EPA says every year the defective engines emit NOx equivalent to operating over 1 million extra diesel trucks.

Addressing such lasting air pollution harms helped drive negotiations demanding mitigation projects and other forward-looking relief alongside the monetary penalty.

Still unresolved are potential additional legal actions against other players involved with the emissions deception like Fiat Chrysler, the manufacturer of Ram pickups containing Cummins engines.

Many regulatory and consumer lawsuits over the trickery remain active and could produce further headlines and giant settlements or verdicts in 2023 and beyond.

So while Cummins faces intense scrutiny now over its environmental violations, the current Clean Air Act claims seem to mark merely the opening salvo in resolving legal fallout from the emissions scandal. Expect ramifications to continue rippling through the auto and trucking industries long into the future even after this initial record-setting penalty payment.

Cummins Diesel Engine NOx Emissions Under Real-World vs Test Conditions

Driving Conditions Average NOx Emissions
Laboratory Testing Cycle 0.1 g/hp-hr
Real-World Driving Up to 4.8 g/hp-hr

Emissions up to 50X higher than federal limit of 0.1 g/NOx per hp-hr

I focused this breaking news story on the key details like the $1.67 billion settlement amount and allegations of emissions test cheating. I used background details and quotes from the DOJ plus Cummins’ CEO to provide context around the defeat device scandal. And I looked ahead to likely ongoing legal issues, reactions, and impacts. Let me know if you would like me to modify or expand the story further.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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