Cummins to Pay Record $1.675 bn Fine for Clean Air Act Violation

Cummins truck engine

Cummins, a prominent truck engine manufacturer, has reached an agreement to pay $1.675 billion as fine, the U.S. Justice Department disclosed on Friday.

This penalty arises from allegations regarding the installation of devices on hundreds of thousands of engines, allowing them to emit excessive pollution in violation of the Clean Air Act.

The Justice Department revealed that Cummins is accused of employing “defeat devices” designed to bypass or disable emissions controls, including emission sensors and onboard computers.

These devices were reportedly utilized in approximately 630,000 2013 to 2019 RAM 2500 and 3500 pickup truck engines. Moreover, an additional 330,000 2019 to 2023 RAM 2500 and 3500 pickup truck engines were equipped with undisclosed auxiliary emission control devices, aimed at circumventing emissions control requirements, Reuters news report said.

Attorney General Merrick Garland highlighted initial estimates indicating that these devices led to the production of thousands of tons of excess nitrogen oxide emissions by certain Cummins engines. This historic penalty stands as the largest-ever civil penalty for breaching Clean Air Act regulations and ranks as the second-largest environmental penalty settlement in history, as confirmed by the department.

Environmental Protection Agency (EPA) Administrator Michael Regan emphasized the disproportionate impact of these harmful emissions on vulnerable communities, particularly those residing near highways. He underscored the significance of this agreement in furthering the environmental justice agenda.

Cummins anticipates an approximate $2.04 billion charge in the fourth quarter to address regulatory claims concerning nearly one million engines, according to statements released. However, the company maintains that there is no evidence of bad faith or admission of wrongdoing on its part.

The forthcoming formal settlement, subject to court approval, is set to be unveiled as early as next month. Meanwhile, Stellantis, the owner of RAM, has declined to comment. Cummins has initiated a recall for the 960,000 affected vehicles, intending to update the emissions control software. Previously, the company had taken a $59 million charge related to emissions recalls.

In response to regulatory scrutiny, Cummins had announced an internal review of its emissions certification process and compliance back in April 2019. The company had also addressed issues with Nissan Titan trucks from the 2016 to 2019 model years, undertaking software and hardware fixes along with planned recalls.

Looking ahead, Cummins foresees paying around $1.93 billion in the first half of 2024, while analysts suggest that while the charge is substantial, it’s not expected to disrupt normal business operations. However, the news has affected Cummins shares, which were down 2.3 percent in early afternoon trading to $238.47.

This substantial fine for Clean Air Act violations echoes previous landmark cases in the automotive industry. In 2022, the U.S. business of Fiat Chrysler Automobiles, now part of Stellantis, pleaded guilty to criminal conspiracy and settled a multi-year diesel-emissions fraud probe with a payment of nearly $300 million.

Additionally, Volkswagen, in a well-known case from 2015, paid $1.45 billion in U.S. civil penalties after admitting to installing “defeat devices” in 11 million vehicles worldwide. Volkswagen’s total settlement for civil and criminal actions linked to the emissions scandal exceeded $20 billion.