Volvo makes provision of $780 million relating to costs to address degrading emission control component issue

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GÖTEBORG, Sweden — As previously communicated, the Volvo Group has detected that an emissions control component used in certain markets and models may degrade more quickly than expected, affecting the vehicles emission performance negatively.

The Volvo Group will in the fourth quarter 2018 make a provision of $780 million relating to the estimated costs to address the issue.

Volvo said in a news release that the estimated costs are based on several factors such as testing of vehicles, statistical analysis and dialogue with relevant authorities.

The next step will be to define how to implement corrective actions concerning the component in vehicles affected by this issue, which will be done together with the relevant authorities.

Volvo said the degradation of the component in question does not pose a product safety issue, nor does it negatively affect vehicle or engine performance in areas other than emissions control. The degradation is a result of a materials issue that occurs over time.

All engines and vehicles equipped with the component meet emissions limits at delivery.

The provision will impact operating income in the fourth quarter of 2018, while the negative cash flow effect will start in 2019 and gradually ramp up in the coming years.

The Volvo Group said it would continuously assess the size of the provision as the matter develops.

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