Germany discovers ‘illegal’ devices that may be in 1M Mercedes diesels

Daimler shares fell following a report that up to 1 million Daimler cars contain illegal defeat devices, as Chief Executive Dieter Zetsche prepared to meet the transport minister on Monday.

Germany's road vehicle authority, KBA, has found five "illegal switch-off devices" in Daimler engines, the Bild am Sonntag newspaper reported on Sunday.

The authority said it suspected the emissions-control devices were being used in the bulk of Daimler's new diesel car fleet that was built to comply with the latest Euro 6 emissions standards, encompassing some 1 million vehicles, according to the report.

Carmakers use software to manage exhaust emissions filtering and engine performance. A device can be classified as illegal if exhaust filtering systems are deactivated too early or without good reason.

This morning, Daimler shares were trading 1.76 percent lower, at 61.19 euros, underperforming the Stoxx 600 Automobile index which was 0.48 percent lower.

German Transport Minister Andreas Scheuer summoned Zetsche after the KBA's discovery, even as Daimler disputes they were illegal.

Daimler declined to comment on the 1 million vehicles figure, but said it is cooperating fully and transparently with the KBA and Germany's Transport Ministry.

Daimler, like other car manufacturers, uses urea nitrate liquids to neutralize nitrogen oxide emissions in exhaust fumes. However, Germany's road vehicle authority, the KBA, has taken issue with the emission control features amid suspicion they allow vehicles to emit excess pollution without detection.

The emissions scandal has hung over the German car industry since September 2015, when Volkswagen admitted to using software that could tell when a diesel vehicle was being tested and temporarily lower its toxic emissions to pass U.S. regulations.

The "||I" scandal has cost VW about $30 billion in fines and other costs.