Volvo Group, the parent of Volvo Trucks North America, has been ordered to pay penalties and interest of approximately $74.1 million to the U.S. Environmental Protection Agency regarding emission compliance of the company’s marine diesel engines.
The U.S. Court of Appeals for the District of Columbia Circuit affirmed a District Court’s ruling that model year 2005 Volvo Penta engines violated the provisions of a consent decree. Volvo says the engines in question are not on-highway engines and should not be covered by the decree.
This is expected to have a negative impact on the group’s operating income of approximately $64 million in the third quarter, according to the company.
In 2012 the District Court issued a judgment ordering the Volvo Group to pay penalties and interest for engines which Volvo claims were not part of the decree. Volvo filed an appeal on several grounds.
The company said it is reviewing the ruling in detail, and will consider whether to appeal.
In 1998, the EPA signed consent decrees with a number of manufacturers of heavy diesel engines for sale in the United States, including Volvo Truck.
“The Volvo consent decree covered engines in highway vehicles but also covered certain engines in construction equipment,” said Kina Wileke, senior vice president, media relations, Volvo Group. “Volvo Penta was not made a party to the consent decree and Volvo did not consider Penta engines subject to the consent decree. Most of Volvo Penta’s engines manufactured during the relevant period were marine engines, which are not within the class of engines covered in the consent decree.”
In addition, Wileka said Volvo Penta’s engines within the relevant size classifications are used primarily for industrial applications, for example stationary diesel generators, rather than in mobile sources as contemplated by the decree.
The news comes as the parent to Volvo Group on Friday said its second quarter profit increased despite a small slip in revenue.
It said European truck order demand is recovering more slowly than expected, eclipsing positive news from regions such as North America, according to the Wall Street Journal. Volvo's results missed analysts' expectations, according to Reuters.
Net income amounted to SEK 2.5 billion, or $378.6 million in the quarter, increasing 21.5% from the second quarter of 2013, while net truck sales increased 4% from a year earlier.