By David Shepardson
WASHINGTON (Reuters) - German automaker Daimler AG said on Tuesday it had dropped plans to seek U.S. approval to sell 2017 Mercedes-Benz U.S. diesel models, but had not decided whether to exit the American passenger diesel market.
"We constantly review our portfolio offerings and make adjustments to meet immediate customer need," Mercedes-Benz USA spokesman Rob Moran said in an email. "Combined with the increased effort to certify diesel engines in the U.S., we have put the certification process for diesel passenger cars on hold."
There has been growing scrutiny of diesel vehicles in the United States since Volkswagen AG <VOWG_p.DE> admitted in September 2015 to installing secret software on 580,000 U.S. vehicles that allowed them to emit up to 40 times legally allowable emissions.
VW was sentenced in April after pleading guilty in the emissions scandal. In total, VW has agreed to spend up to $25 billion in the United States to address claims from owners, environmental regulators, states and dealers and offered to buy back about 500,000 polluting U.S. vehicles.
Last month, Daimler said investigations by authorities of diesel emissions and auxiliary emission control devices could lead to significant penalties and recalls.
The U.S. Justice Department, EPA, California Air Resources Board and a prosecutor in Stuttgart, Germany, are investigating emissions of Mercedes-Benz diesel vehicles.
In March, the Stuttgart prosecutor launched an investigation against Daimler employees on suspicion of fraud and misleading advertising tied to vehicle emissions.
The company told Automotive News in October that it planned to seek approval to sell four U.S. Mercedes diesel models for the 2017 model year. Last year, Mercedes-Benz offered four U.S. diesel models.
In April, Dietmar Exler, president and chief executive of Mercedes-Benz USA, told reporters the company had not made a decision "one way or the other" on the future of U.S. diesel sales.
Moran said diesel vehicles in the U.S. in 2016 accounted for less than 1 percent of U.S. sales and the company could still opt to seek 2017 certification at a later date. The company is "leaving the door open to offer diesels as a potential option in our passenger cars and SUVs."
Daimler won approval in late April to sell U.S. diesel Sprinter commercial vans after months of talks with regulators.
In January, the EPA and CARB accused Fiat Chrysler Automobiles NV of illegally using software to allow excess diesel emissions from 104,000 U.S. trucks and SUVs. Regulators have refused to grant Fiat Chrysler approval to sell 2017 U.S. diesel models.
(Reporting by David Shepardson; Editing by Peter Cooney)