On the same day Volkswagen announced a nearly $1 billion fine for its diesel emissions scandal, Volvo Group revealed that an unexpected degradation of emissions control components is causing engines to exceed emissions limits for nitrogen oxides. The scope of the defect is not yet known.
According to a Volvo Group news release on Tuesday, Oct. 16, “an emissions control component used in certain markets is degrading more quickly than expected.” Although the result is higher NOx emissions, Volvo Group claims that all vehicles equipped with component meet emissions standards at delivery.
Degradation is being blamed on a “materials issue” over time.
“The investigation so far indicates that the degradation does not seem to affect all vehicles and engines in the same way and to the same extent,” Volvo Group said in a statement. “The company is now in the process of informing the appropriate authorities in various markets, and beginning discussions regarding remediation plans.”
Exactly which markets and which vehicles are affected is unclear as of Oct. 17. Volvo Group pointed out that the largest volume of potentially affected engines were sold in North America and Europe. The company owns Volvo Trucks, Mack Trucks and Renault Trucks.
In 2017, Volvo Group reached its highest sales and operating income in the company’s history. Last year, Volvo Group sold more than 240,000 trucks in North America and more than 300,000 trucks throughout Europe. Between the two continents, Volvo Group expected an increase of 30,000 truck sales for 2018.
On Tuesday, Volvo’s stock plummeted nearly 9 percent after news of the degrading product surfaced
Volvo Group states that the defective component does not pose any safety issues or negatively affect performance outside of emissions control.
“A full analysis of the issue and plans with regulatory authorities are not completed and the company is therefore not yet able to estimate the volume of engines or vehicles that may need to be addressed,” Volvo Group said. “Consequently it is not possible to assess the financial impact at this stage; however the cost to redeem the issue could be material.”
Although the issue deals with emissions, Volvo Group’s situation appears to be different than what Volkswagen has been going through. Whereas Volvo Group’s problem seems to stem from a part made by another company, Volkswagen’s emissions scandal was a malicious attempt to bypass emissions standards committed in house. On Tuesday, Audi AG – owned by Volkswagen – was fined 800 million euros for the scandal, equivalent to approximately $923.3 million.
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