German Authorities Raid Daimler Offices Over Diesel-Emissions Fraud Probe

By William Boston Features Dow Jones Newswires

German authorities turned up the heat on Daimler AG in an investigation into alleged diesel-emissions fraud, raiding the company's Stuttgart headquarters and other sites to secure evidence, prosecutors said on Tuesday.

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The search of offices of the maker of Mercedes-Benz cars involved more than 230 officials and 23 prosecutors at 11 sites in the German states of Baden-Wuerttemberg, Berlin, Lower Saxony and Saxony. Investigators confiscated files and computer drives containing sensitive data.

Daimler shares were trading slightly higher than Monday's close of EUR67.74, but after news of the raids shares fell sharply before bouncing back in late afternoon to EUR67.15.

The investigation of Daimler was launched in March and comes on the heels of heightened enforcement of emissions standards in the wake of Volkswagen AG's admission in 2015 that it rigged millions of diesel-powered vehicles world-wide to cheat on emissions tests.

Prosecutors in Stuttgart are investigating allegations that "known and unknown employees" at Daimler engaged in "fraud and criminal advertising relating to the possible manipulation" of diesel emissions systems, Daimler said in a statement.

Daimler said it was cooperating with authorities, declining to elaborate.

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The German investigation coincides with a similar investigation in the U.S. Last month, Daimler said it had withdrawn an application to certify model year 2017 diesel vehicles in the U.S. in light of the investigation.

Since the disclosure of Volkswagen's emissions-cheating by U.S. authorities in September 2015, further investigations have been launched into other car makers around the world suspected of manipulating diesel emissions. Volkswagen has agreed to pay nearly $25 billion in penalties, fines, legal fees and compensation for consumers.

Fiat Chrysler Automobiles NV said last week that it would modify the software on more than 100,000 diesel powered vehicles in the U.S. in a bid to resolve allegations by U.S. authorities that Fiat installed software on the vehicles that allowed them to pass emissions test but exceed U.S. emissions limits during normal road driving.

Nevertheless, the U.S. Justice Department is near suing Fiat Chrysler and alleging the Italian-American auto maker used illegal software to cheat on government emissions tests, people familiar with the matter said, despite a recent proposal from the company to regulators on fixing the technology.

Federal prosecutors are expected to file the lawsuit against Fiat Chrysler as soon as Tuesday, though the timing could slip, the people said. The suit is expected to accuse Fiat Chrysler of using defeat-device software that allowed roughly 104,000 2014-2016 model-year Jeep Grand Cherokee sport-utility vehicles and Ram pickup trucks to pass government emissions tests and then pollute far beyond legal limits on the road.

The Wall Street Journal has reported that the U.S. probe could eventually cost Fiat more than $4 billion in penalties, depending on how the investigation unfolds.

Prosecutors have declined to elaborate on their investigation of Daimler and it is not clear whether Daimler faces any significant penalties. The company warned in April that U.S. authorities could determine that its emissions control system used an illegal defeat device to suppress emissions as defined by U.S. law.

European laws regulating the use of software to regulate emissions is less stringent that U.S. law. That's why the German investigation of Daimler is focusing on false advertising, analysts said. Daimler could be found guilty of false advertising if it knowingly understated emissions when seeking to have diesel vehicles certified.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

May 23, 2017 12:04 ET (16:04 GMT)