Volvo reaches settlement deal with California Air Resources Board

Volvo (VLVLY) Group North America has reached a settlement with the California Air Resources Board. The settlement resolves allegations by CARB regarding the adequacy of the description of certain emission controls on model year 2010-2016 engines installed in Volvo Group trucks sold in California. The Volvo Group’s internal review found no evidence that anyone acted in bad faith, and the settlement is explicitly without admission of liability, the company said. Volvo Group has agreed to pay $12.5M in civil penalties, $71M to CARB’s Air Pollution Control Fund, spend $108M on California emission-reduction projects under a plan to be submitted for CARB approval within a year, and to reimburse $5M of CARB costs. Consequently, Volvo Group’s operating income in the second quarter of 2026 will include a negative impact of $196.5M, which will be excluded from adjusted operating income. The operating cash flow in the second quarter of 2026 will be negatively impacted by $89M. The remaining cash flow effect is expected to occur over the coming five years. Volvo Group proactively disclosed the issues that were the subject of CARB’s concerns nearly a decade ago and has worked cooperatively with CARB to resolve the matter. Volvo Group will make available software updates and a partial warranty extension for about 7,200 model year 2014-2016 engines in California as part of the settlement. The Volvo Group is not aware of any additional investigations related to its engines’ emissions compliance in the U.S.