Cummins to pay nearly $1.7B to settle federal investigation
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Cummins Inc. has agreed to pay $1.675 billion to settle allegations that the engine-maker violated the Clean Air Act by unlawfully altering hundreds of thousands of pickup truck engines to bypass emissions tests.
It’s the largest settlement ever reached under the Clean Air Act, and the second largest of any environmental penalties, according to an announcement Friday from the U.S. Department of Justice.
To put the settlement amount in another perspective, Cummins booked annual profits of $2.2 billion on $28.1 billion in sales last year. The Columbus, Indiana-based company has 73,600 global employees.
“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,” U.S. Attorney General Merrick Garland said in a prepared statement.
The governmental entities involved in the matter include the U.S. Environmental Protection Agency, the California Air Resources Board, the Department of Justice’s Environment and Natural Resources Division and the California Attorney General’s Office.
The government alleged that Cummins installed “defeat devices” on the emissions control components of 630,000 RAM 2500 and 3500 pickup truck engines for the 2013 through 2019 model years; and installed undisclosed auxiliary emissions control devices on 330,000 RAM 2500 and 3500 pickup truck engines for the 2019 through 2023 model years.
For its part, Cummins spokesman Jon Mills said, “We’ve seen no evidence that anyone acted in bad faith, and we do not admit wrongdoing.”
“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 said in an announcement on Friday.
The issue has been an ongoing concern for more than four years.
In April 2019, Cummins announced that it was reviewing its certification process and compliance with emissions standards as a result of its “conversations with the U.S. Environmental Protection Agency and the California Air Resources Board regarding certification for the engines in the 2019 RAM 2500 and 3500 trucks.”
As discussions continued, regulators broadened their investigation. In connection with the matter, Cummins recalled RAM 2500 and 3500 trucks for the 2013 through 2018 model years, and Titan trucks for the 2016 through 2019 model years.
Cummins accrued $59 million in costs related to those two recalls, the company said last month in a quarterly financial report.
In recent years, Cummins has touted its efforts to reduce carbon emissions in its products and its operations. The company’s Destination Zero effort aims to reach zero emissions by 2050, including shorter-term goals by 2030. And earlier this year, Cummins rebranded its zero-emissions business unit, including its electric and hydrogen product lines, as Accelera by Cummins.
Mills said Cummins remains focused on those goals, adding that the company has a strong history of “meeting and exceeding” emissions standards.
“We’re taking this really seriously. Emissions and decarbonization are really important to us,” Mills told IBJ. “We’re committed to innovation, and we’re committed to doing the right things.”
Related to Friday’s announcement, Cummins said it expects to record a charge of about $2.04 billion this quarter. That figure includes the settlement amount plus future related expenses such as testing and mitigation efforts, Mills said.
Shares of Cummins were trading at about $237 late Friday morning. That was a drop of close to $7, or nearly 3%, from Thursday’s closing price.