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October 26, 1998 10:52 AM, EST

EPA Fines Diesel Engine Makers

Diesel engine manufacturers have agreed to pay record fines of $185 million and make significant design modifications to settle Environmental Protection Agency claims that they broke clean-air standards.

Engine recalls are not part of the deal. But manufacturers will have to retrofit any engines they rebuild.

The federal agency estimates the costs to manufacturers of design modifications and retrofitting will exceed $850 million.

In announcing the agreement, Attorney General Janet Reno said "emissions from diesel engines will be reduced by one-third from their current level" over the next five years.

The settlement stems from EPA allegations that engine makers have designed electronic controls so that their engines run clean enough to pass the certification test, but don't meet emissions targets under real highway conditions (TT, 2-2-98, p. 1).

The engine manufacturers — Caterpillar Inc., Cummins Engine Co., Detroit Diesel Corp., Mack Trucks, Navistar International Transportation Corp. and Volvo Truck Corp.— agreed to settle, but continue to deny they violated any laws. These manufacturers account for 95% of the heavy-duty diesel engines sold in the U.S.

As part of the agreement, the companies will pay $109.5 million to fund environmental research and development projects.

In addition, they will pay $83.4 million in civil penalties, one fourth of which will go to California, which has a related settlement with the companies.

These penalties total the largest ever for an environmental law.

In addition to the monetary penalties, the companies agreed to adopt stricter air quality standards that were set to go into effect in 2004, 15 months earlier instead.

As for the engines on the road today, the general recalls that environmental advocates wanted are not a part of the agreement.

Instead, engine manufacturers will have to pay for emissions-reduction retrofitting when their engines are rebuilt. Ms. Browner estimated that since engines are usually rebuilt every three years, 1.1 million trucks will have to be retrofitted each year until full compliance is attained.

To ensure that the new standards are met the EPA is working on a new emissions test that is stricter and more comprehensive than the one in use now.

According to Heino Scharf, director of product assurance for Volvo, the new test will incorporate aspects of the Euro-III, which European Union countries have used for years. It tests a wider range of speeds and is more representative of what really happens under both urban and highway conditions, ATA's Mr. Schaeffer said.

While applauding these steps to reduce pollution, some in the trucking industry are concerned about the wide ramifications of this agreement.

The redesigned engines could use up to 10% more fuel and require shorter maintenance intervals, Mr. Schaeffer said.

Another concern is that the new engines, which will likely need a bigger radiator, will require the front ends of trucks to be changed in order to fit. "What we're hearing is that some of the time frames of the settlement are very aggressive and the manufacturers of the trucks feel that they can't possibly do what the engine makers have agreed to with the EPA in those time frames," said Mr. Schaeffer.

All this could have a disastrous effect on the sales on new engines and trucks, said ATA President Walter B. McCormick Jr.

"We do remain concerned about the fact that many of these technical changes to new engines could significantly reduce fuel economy of trucks, impacting future purchase plans. The impacts of this settlement may very well give pause to trucking companies placing orders in the next few years, and could result in the delay or cancellation of current orders for new equipment."

Engine manufacturers said they are confident they will be up to the challenges of meeting the terms of the agreement without reducing performance.