The Volvo Group has detected that an emissions control component used in certain markets and models may degrade more quickly than expected, thereby affecting the vehicles emission performance negatively. As a consequence, the Volvo Group made a provision £615.8m in the fourth quarter of 2018, relating to the estimated costs to address the issue.
The estimated costs are to cover things like 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. This will be done together with the relevant authorities.
The company states that the degradation of the component 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 the company’s 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.