Volvo Raises Red Flag on Potential Emissions Issue

A rather cryptic press release from the Volvo Group in Sweden has rattled investors and raised more questions than answers about a vital emissions control component and/or material used to reduce nitrogen oxide levels in diesel exhaust smoke.

According to AB Volvo, the largest volume of potentially affected engines has been sold in North America and Europe.

According to Claes Eliasson, senior vice president, media relations, Volvo Group Communication, the issue is part of the selective catalyctic reduction system used to reduce NOx emissions. He said the matter involces a complex materials issue which requires continous investigation and testing until the full scope has been identified and can be addressed. The issue was identified through Volvo's internal process, he added.

According to the release, Volvo Group has detected that an emissions control component used in “certain markets” is degrading more quickly than expected, which could cause the engines to exceed emissions limits for nitrogen oxides (NOx). All products equipped with the component meet emissions limits at delivery; the degradation is due to a materials issue that occurs over time, the OEM said.  A full analysis of the issue is not completed and thus, the company stated, "it is not possible to assess the financial impact at this stage; however, the cost to redeem the issue could be material."

Volvo Group also said the degradation of the component does not pose a product safety issue, nor does it negatively affect vehicle or engine performance in areas other than emissions control. The company added that the degradation is a result of a materials issue that occurs over time. Volvo also stressed that all engines and vehicles equipped with the component meet emissions limits at delivery.

Volvo Group said full analysis of the issue and plans with regulatory authorities are not completed and therefore it is not yet able to estimate the volume of engines or vehicles that may need to be addressed. Consequently, the OEM said it is not possible to assess the financial impact at this stage of the investigation. Eliasson stressed that Volvo is working to remedy the problem as quickly as possible, and noted that, "Remediation plans may include a servicemarket solution." 

According to a report posted by Bloomberg.com, the press release stoked more fears than it allayed among investors, with the Volvo Group taking a 5% slump in trading on Tuesday, October 16^th – a $1.5 billion reduction in market value.

This story has been updated.