Engine manufacturer Cummins Inc. today disclosed that it has reached an agreement in principle with the United States and State of California to pay a $1.675 billion penalty to settle claims that it violated the Clean Air Act by installing emissions defeat devices on hundreds of thousands of engines. The Clean Air Act requires vehicle and engine manufacturers to ensure that their products comply with applicable emission limits. Defeat devices are parts or software that bypass, defeat, or render inoperative emissions controls such as emission sensors and onboard computers. The company allegedly installed defeat devices on 630,000 model year 2013 to 2019 RAM 2500 and 3500 pickup truck engines. The company also allegedly installed undisclosed auxiliary emission control devices on 330,000 model year 2019 to 2023 RAM 2500 and 3500 pickup truck engines.
The Justice Department issued the following statement from Attorney General Merrick B. Garland:
“The Justice Department is committed to vigorously enforcing the environmental laws that protect the American people from harmful pollutants.
“Today, the Justice Department reached an initial agreement with Cummins Inc. to settle claims that, over the past decade, the company unlawfully altered hundreds of thousands of engines to bypass emissions tests in violation of the Clean Air Act. As part of the agreement, the Justice Department will require Cummins to pay $1.675 billion, the largest civil penalty we have ever secured under the Clean Air Act, and the second largest environmental penalty ever secured.
“The types of devices we allege that Cummins installed in its engines to cheat federal environmental laws have a significant and harmful impact on people’s health and safety. For example, in this case, our preliminary estimates suggest that defeat devices on some Cummins engines have caused them to produce thousands of tons of excess emissions of nitrogen oxides. The cascading effect of those pollutants can, over long-term exposure, lead to breathing issues like asthma and respiratory infections.
“The Justice Department will work diligently to incorporate today’s agreement into a consent decree that will be filed with the U.S. District Court for the District of Columbia.
“I am grateful to the dedicated women and men of the Environment and Natural Resources Division, as well as to our partners from the EPA, and the State of California, for their assistance in investigating and prosecuting this case and in reaching this important agreement.
“Violations of our environmental laws have a tangible impact – they inflict real harm on people in communities across the country. This historic agreement should make clear that the Justice Department will be aggressive in its efforts to hold accountable those who seek to profit at the expense of people’s health and safety.”
COLUMBUS, Indiana— Cummins Inc (NYSE: CMI) has reached an agreement in principle to resolve U.S. regulatory claims regarding its emissions certification and compliance process for certain engines primarily used in pick-up truck applications. The company has cooperated fully with the relevant regulators, already addressed many of the issues involved, and looks forward to obtaining certainty as it concludes this lengthy matter. Cummins conducted an extensive internal review and worked collaboratively with the regulators for more than four years. The company has seen no evidence that anyone acted in bad faith and does not admit wrongdoing.
The governmental entities involved are the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environment and Natural Resources Division of the Department of Justice (DOJ), and the California Attorney General’s Office.
Cummins disclosed a review of these matters when it began in 2019 and has regularly updated its disclosures as that review progressed. The company has already recalled model year 2019 RAM 2500 and 3500 trucks and has initiated a recall of model years 2013 through 2018 RAM 2500 and 3500 trucks and previously accrued a total of $59 million for the estimated costs for executing these and other related recalls.
Cummins expects to record a charge of approximately $2.04 billion in the fourth quarter of 2023 to resolve these and other related matters involving approximately one million pick-up truck applications in the United States. Of this amount, approximately $1.93 billion relates to payments that are expected to be made in the first half of 2024. The balance reflects our best estimate of related expenses that will impact cash flow in future periods. The company is in a strong financial position with existing liquidity and access to capital to satisfy obligations associated with the settlements, support ongoing operations, and execute its growth strategy.
The settlements are subject to final regulatory and judicial approvals.
