IMSK-MDT engine emissions spat reaches new level

Oct 26 2015


IM Skaugen IMSK) is currently seeking $50 mill in compensation from MAN Diesel & Turbo (MDT) part of the Volkswagen (VW) group, for rigging performance tests of ship engines built more than 10 years ago.

According to a Reuters report, the shipowner alleged that the specifications of the six engines it bought from MDT were misleading and was demanding compensation for higher fuel use than specified over the expected 30-year engine life cycles.

According to Reuters, VW owns 75% percent of MDT, although it was not the owner when the engines were built. MDT delivered the engines to Skaugen in 2002-03 and is believed to have legal counter-claims over contracts with IMSK. VW first acquired a 22% stake in MDT in 2006 and acquired a controlling 55% stake in 2011 and now owns 75%.

IMSK told Reuters that it had now decided to publicise the case, filed in a Singapore court in July, as it saw similarities between MDT’s handling of the ship engine tests under VW ownership and the German company's response to the accusations of exaggerated claims on diesel car emissions tests.

"We have tried to engage MAN for quite some time to sort out these problems. In 2012 we were promised transparency and we were promised that they would do whatever they could to settle the issues," CEO Morits Skaugen told Reuters.

"My goal here is to highlight that the method being applied, the software, is the same. The purpose seemed to be the same, to conceal the fact that these engines do not meet the promised standards, whether it is fuel consumption or emissions,”he said.

In 2011, MDT admitted that some of its factory tests of 4-stroke engines may have been rigged to show artificially low fuel use. A MDT spokesman told Reuters that the company had since worked to compensate customers but did not reveal a list of those affected but admitted it had been unable to settle with IMSK.

In July 2015, IMSK filed a $20 mill suit in a Singapore court for compensation for the six engines, which it says were under performing. IMSK said the company would revise the amount up to $50 mill to reflect new estimates for fuel and other costs.

IMSK claimed that the two sides had been near to agreeing a settlement but that MDT withdrew support for its chief negotiator, prompting a collapse.

MDT counter claimed that it had "substantial outstanding claims" against IMSK linked to "different supply contracts," Reuters reported.

IMSK further claimed that it would not have placed the order had it known about the underperformance of the engines.

In 2013, an Augsburg court fined MDT €8.2 mill for violating laws with the misleading test results of dozens of marine diesel engines, including those sold to IMSK. Software in the factory computers allowed displays to show lower fuel consumption than in reality, the court said.

MDT claimed that the company had since overhauled its engine tests and had done everything possible to settle the disputes. 



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