Cummins Inc. has agreed to pay a $2.04 billion charge to resolve discrepancies in emissions certifications in some of Cummins’ pick-up truck engines.

Cummins officials told investor analysts during its second quarter earnings conference call that a fine was possible. Company officials announced in late December that Cummins had finalized the deal. Cummins expects to record a charge of $2.04 billion in the fourth quarter of 2023 to resolve the issues, which involved a million pick-up truck engines in the United States. Company officials said $1.93 billion of the payments will be made in the first half of 2024. The settlements are subject to final regulatory and judicial approvals.

The governmental entities involved are the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environment and Natural Resources Division of the Department of Justice (DOJ), and the California Attorney General’s Office. According to an SEC filing early last year, the issue began with a review of emission standards compliance for model year 2019 RAM 2500 and 3500 trucks. Regulators then expanded their review to the 2013-18 Ram 2500 and 3500 as well as Nissan Titan engines for 2016-19.

“The company has cooperated fully with the relevant regulators, already addressed many of the issues involved, and looks forward to obtaining certainty as it concludes this lengthy matter,” the company stated in a news release. “Cummins conducted an extensive internal review and worked collaboratively with the regulators for more than four years. The company has seen no evidence that anyone acted in bad faith and does not admit wrongdoing.”

The Post-Journal reported on the possible fine in May 2023. A final decision was announced in late December.

The U.S. Justice Department said the fine is $1.675 billion, the largest civil penalty the Justice Department has secured under the Clear Air Act to date and second largest environmental penalty ever secured. The Justice Department accuses Cummins of installing defeat devices — which can bypass or defeat emissions controls — on 630,000 2013-2019 Ram 2500 and 3500 pickup truck engines, as well as undisclosed auxiliary emission control devices on 330,000 2019-2023 Ram 2500 and 3500 pickup truck engines.

Cummins officials had said in a 2023 SEC filing that EPA and CARB regulators raised concerns that certain aspects of Cummins’ emissions systems may reduce the effectiveness of emissions control systems and thereby act as defeat devices that counteract emissions controls. Company officials did not admit any wrongdoing, noting the company “has seen no evidence that anyone acted in bad faith.”

EPA regulations apply to virtually every vehicle, engine and type of transportation fuel sold in the United States. The EPA uses a variety of testing and reporting programs to monitor compliance with emissions regulations. The programs may apply to vehicles and engines before they are produced (pre-production), while they are in production and after they are in customer service (post-production). The Clean Air Act requires that all engines and vehicles be covered by a certificate of conformity before they can enter into commerce. A certificate of conformity demonstrates that the respective engine or vehicle conforms to all of the applicable emission requirements.

The certificate represents engines and vehicles covered by a specific engine family or, in the case of light-duty vehicles, a specific test group for each manufacturer. At the same time, the California Air Resources Board (CARB) evaluates the emission control systems of new vehicles and engines, and evaporative emission control systems of engine-equipped devices. When CARB finds that the vehicle/engine/evaporative emission control system complies with all of California’s emission standards and emissions-related requirements, the vehicle/engine/evaporative emission control system may be produced for California sale. Meeting California’s standards is important for vehicle makers because California’s emissions standards are so stringent.

“I do want to start by saying that Cummins is fully committed to emissions compliance,” said Jennifer Rumsey, Cummins president and chief executive officer, during the May conference call with investor analysts. “We have been and we’ll continue to cooperate with agencies all along and work through this matter to the best of our abilities. And our updated disclosure today is consistent with what we’ve done since we first announced our voluntary internal review in 2019 of disclosing transparently throughout this process. So, as Mark said, we think that we are nearing the end. It’s premature to speculate though exact timing or exact amount at this point. We feel like the business is well positioned in a strong financial position and continuing to generate strong returns.”