GM Sued by Diesel Truck Owners Over Emissions -- 2nd Update

By Mike Spector and Mike Colias Features Dow Jones Newswires

General Motors Co. was accused in a lawsuit by owners of diesel-powered trucks of using illegal emissions software that allowed the vehicles to bypass government emissions tests and pollute far beyond legal limits on the road.

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Owners of heavy-duty Chevrolet Silverado and GMC Sierra Duramax pickup trucks sued GM in a Detroit federal court on Thursday, accusing the auto maker of using so-called defeat devices that deceived government regulators. The devices allowed the vehicles to appear cleaner during government tests, and then emit nitrogen oxides two to five times above allowable limits in normal driving conditions, according to the lawsuit.

The suit targets more than 705,000 vehicles currently estimated to be on the road, with model years between 2011 and 2016. It follows Volkswagen's admitted emissions transgressions with illegal diesel-emissions software and allegations that Fiat Chrysler Automobiles NV also used defeat devices. Fiat Chrysler denies that claim.

GM shares were off more than 2.7% in afternoon trading on the New York Stock Exchange.

The suit says GM promised its diesel-engine technology would turn heavy fuel into a "fine mist" and deliver low emissions that were a "whopping reduction" from the previous model. Instead, GM used three defeat devices that turn down emissions controls when the vehicle isn't being tested, the lawsuit alleges.

"These claims are baseless and we will vigorously defend ourselves," GM said. The Detroit auto maker said the vehicles comply with all U.S. Environmental Protection Agency and California Air Resources Board emissions regulations.

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U.S. authorities haven't accused GM of any wrongdoing related to tailpipe diesel emissions. The same law firm sued GM in June 2016 on behalf of owners of diesel-powered Chevy Cruze models, alleging GM equipped model-year 2014 cars with defeat devices. A federal judge in February tossed part of the suit but allowed some aspects to move forward, including claims of fraudulent concealment.

The lawsuit filed on Thursday also alleges that Robert Bosch GmbH worked on technology that allowed GM to implement defeat devices on its heavy-duty diesel trucks. A Bosch spokeswoman said it takes "allegations of manipulation of the diesel software very seriously." Bosch is cooperating with investigations of alleged emissions transgressions while defending itself in litigation, the spokeswoman said.

RBC Capital Markets analyst Joseph Spak initially flagged the suit against GM as a "negative" sentiment indicator, but later pulled the evaluation back to "neutral," pointing to the company's statement as an indication the lawsuit was "opportunistic."

Still, a series of lawsuits and investigations over the past few years have called into question diesel engines that auto makers marketed as environmentally friendly and clean.

The suit against GM comes on the heels of Volkswagen's admission to rigging nearly 600,000 diesel-powered vehicles in the U.S. with defeat devices, a scandal that led the auto maker to plead guilty to criminal charges and agree to legal settlements totaling more than $25 billion depending on how many cars it repurchases.

Volkswagen is referenced more than 80 times in Thursday's suit against GM. "VW opened the door for speculation and now people are asking whether all diesels are clean or not," said AutoPacific Inc. analyst Dave Sullivan. "Everyone is going under the microscope."

In addition, the U.S. Justice Department on Tuesday filed a civil suit against Fiat Chrysler, accusing the Italian-U.S. auto maker of using similar illegal software on nearly 104,000 Jeep Grand Cherokee sport-utility vehicles and Ram pickup trucks with diesel engines.

Fiat Chrysler has denied using illegal software intended to dupe regulators, and contends it can update software in affected vehicles to address concerns of U.S. and California environmental regulators.

Thursday's lawsuit called GM "no different" than other auto makers caught in authorities' crosshairs on emissions. The auto maker charged a $5,000 premium on its heavy-duty diesel-engine trucks over comparable gasoline-powered models and deceptively marketed them as "having low emissions, high fuel economy, and powerful torque and towing capacity," the lawsuit said.

Law firm Hagens Berman Sobol Shapiro LLP filed the purported class-action lawsuit against GM. The firm represented consumers in class-action litigation consolidated against Volkswagen, and has also sued Fiat Chrysler for its alleged emissions lapses.

GM's heavy-duty diesel trucks are among the company's most-profitable vehicles, typically selling for more than $60,000. They represent about 12% of GM's overall pickup-truck sales, according to RBC Capital Markets. The pickup business accounts for more than half GM's bottom line globally, according to analysts.

Many owners of larger pickup trucks favor diesel engines for their durability and extra torque for hauling and towing. Analysts have expected diesel-powered trucks to remain popular for those reasons, despite fallout from Volkswagen's emissions woes.

GM introduced a new Duramax engine on the heavy-duty Silverado and Sierra for the 2017 model.

Chester Dawson contributed to this article.

Write to Mike Spector at mike.spector@wsj.com and Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

May 25, 2017 15:03 ET (19:03 GMT)