Ford Motor will pool its CO2 output with Volvo Cars to avoid a fine from the European Union for missing its 2020 emissions reduction target.
Ford said earlier this month it would need to take the step after it was forced to stop sales of its key low-emissions model, the plug-in hybrid version of its Kuga SUV, because of a battery heating issue. Ford in August recalled 20,808 Kuga plug-in hybrids after a number of vehicles caught fire.
A Ford of Europe spokesman said on Thursday: "Based on our product roadmap and production schedule for this year, we expected to comply with the new regulations. However, given the current supplier battery issue with the Kuga PHEV, Ford now will enter a pool to meet the EU’s 2020 emissions regulations without penalty for passenger vehicles."
The spokesman said Ford will pool with Volvo.
Ford faces a financial hit of $500 million to $600 million in the third and fourth quarters because of the problems with the SUV.
Chief Financial Officer John Lawler said about $400 million of that hit came in the third quarter and the automaker expects the fourth-quarter impact to be "somewhere between $100 million to $200 million."
"That includes the impact of the pooling effort that we're going to have to undertake for passenger vehicles in Europe," Lawler said during a conference call on Wednesday.
Ford declined to say how much it would pay Volvo to join its pool.
Volvo also declined to comment, only saying in a release that the "resulting revenue from the deal will be reinvested in new green technology projects."
Volvo said since Ford is the pool manager it is responsible for any EU fine if the CO2 target is not reached.
Volvo and its subsidiary, Polestar, are on track to be well below their mandated EU target of 110.3 grams per km for 2020. Through eight months the two brands’ CO2 was 103.1 g/km, according to data from market researcher JATO Dynamics.
Ford was within 1.4 g/km of meeting its CO2 target by the end of the first half of the year, according to a report from Transport & Environment. Based on that, the green lobby group predicted Ford was on course to meet its CO2 obligations in Europe.
Ford said that paying fines was not an option, adding that it would have met its CO2 target of 98 g/km for the year had it not run into problems with the Kuga.
Volvo was part of Ford until 2010 when Ford sold the Swedish automaker to its current owner, China's Zhejiang Geely Holding.
Regulatory pools are a legal solution that allow companies at risk of missing their emissions targets to join competitors with lower fleet CO2.
Other automakers are creating emissions pools to avoid EU penalties.
Volkswagen Group is pooling its emissions with Chinese joint venture partner SAIC Motor and its UK subsidiary MG Motor. Fiat Chrysler Automobiles has pooled with Tesla.