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The Mercedes-Benz logo is seen before the company's annual news conference in Stuttgart, Germany, on Feb. 4, 2016.Michaela Rehle/Reuters

Daimler AG will pay an US$875-million civil penalty for violating U.S. clean air laws as part of a US$1.5-billion settlement with U.S. and California regulators over excess diesel emissions in passenger vehicles and vans.

Deputy attorney-general Jeff Rosen said the settlement, which follows a nearly five-year investigation, will “serve to deter any others who may be tempted to violate our nation’s pollution laws in the future.”

The German automaker and its Mercedes-Benz USA LLC unit disclosed on Aug. 13 it had reached a settlement in principle resolving civil and environmental claims tied to 250,000 U.S. diesel cars and vans after the automaker used software to evade emissions rules.

Daimler said in August expected costs of settlements with U.S. authorities would total US$1.5-billion, settling with owners will cost another US$700-million and also disclosed “further expenses of a mid three-digit-million EUR [euro] amount" to fulfill requirements of the settlements.

EPA Administrator Andrew Wheeler said Daimler “willfully installed” software to defeat emissions rules.

“If you try to cheat the system and mislead the public, you will be caught,” Mr. Wheeler said.

Daimler noted in court papers it denies the allegations “and does not admit any liability.” The settlement does not include an external compliance monitor, it added. The German automaker still faces an ongoing criminal investigation and could face additional U.S. financial penalties.

The settlements require Daimler to address the vehicles' excess emissions as part of binding consent decrees. Daimler will issue recalls and extended warranties but is not required to buy back vehicles.

Daimler will replace or repower 15 older, higher-polluting line-haul locomotive engines to more stringent emissions standards to offset excess emissions.

The Justice Department said Daimler failed to disclose at least 16 auxiliary emissions control devices, the government alleged, allowing “vehicles to perform in a variety of consumer-desirable ways, including allowing for fewer [diesel exhaust fluid] tank refills [and] better fuel mileage.”

The settlement includes an US$875-million civil penalty levied under the Clean Air Act and US$546-million to fix the polluting vehicles and offset excess emissions, court papers show. Daimler will pay California US$285.6-million in total.

Diesel vehicles have come under scrutiny in the United States since Volkswagen AG admitted in September, 2015, to installing secret software on 580,000 U.S. vehicles that allowed them to emit up to 40 times the legally allowable emissions.

In September, 2019, Daimler in Germany agreed to pay a fine of €870-million (US$1-billion) for breaking diesel emissions regulations.

Both Volkswagen and Daimler have halted sales of U.S. passenger diesel vehicles.

Fiat Chrysler Automobiles NV in 2019 reached a settlement worth about US$800-million to resolve claims by regulators and owners that it used illegal software that produced false results on diesel-emissions tests.

Fiat Chrysler said in July it was in talks to resolve an ongoing Justice Department criminal probe.

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