16 October 2018 by lberuti
Until now, truck makers had largely escaped the scrutiny that put car manufacturers on the defensive since the Volkswagen diesel-emissions scandal erupted in 2015. In fact, studies showed that modern trucks are surprisingly clean… if all their components function properly. VLVY ( Volvo AB ), the Swedish truck maker, announced this morning it has detected problems with an emission control component, which is “degrading more quickly than expected”, resulting in engines exceeding limits for nitrogen oxides. The degradation which “is due to a materials issue that occurs over time (…) does not affect all vehicles and engines in the same way and to the same extent”. The cost to fix the problem with the part, which comes from an outside supplier, could be “material” but is therefore difficult to assess at this stage according to the company. Crucially for VLVY, its trucks’ emission problems are not due to deliberate manipulation, but the news certainly spooked investors. They sent VLVY’s 5-year risk premium 14bps wider at 83bps, the widest it has been since the very end of 2016.