Volvo Readies $780M for Emissions Control Issue

The Volvo Group, the parent company of both Volvo Trucks North America as well as Mack Trucks, will be setting aside $780 million to address an emissions control issue in heavy-duty diesel engines.

In a January 3 press release, Volvo says it will readying the fund after a “dialogue with relevant authorities”, and after taking into consideration statistical analysis and the cost of retrofitting affected vehicles.

The issue stems from an emissions control component used in heavy-duty diesel engines that may degrade earlier than expected. This would cause the affected engines to exceed emissions standards for nitrogen oxide, or NOx. Such engines are equipped with selective catalytic reduction systems, an after-treatment process that allows diesel mills to meet the EPA’s 2010 emissions standards for NOx.

Volvo has clarified that the degradation does not pose a product safety issue, nor does it negatively affect truck performance other than emissions control.

While there is no definitive fix yet, the company says the next step is figuring out how to correct the issue “together with the relevant authorities”, which is presumably the EPA.

Volvo admitted that the emissions fund will likely affect its operating income for the last quarter of 2018, and result in a negative cash flow at the start of this year. Analysts at Bloomberg project the Swedish giant will weather the storm and still pay shareholders an extra dividend when all is said and done, thanks to record profits over the past year.