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W?rtsil? Admits Manipulation of Engine Fuel Tests

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By MarEx 2016-03-07 15:21:55

Finnish engineering company Wärtsilä said workers at one of its businesses in Italy had manipulated a small number of fuel consumption tests for its ship engines before they were delivered to customers.

"This is a hit to our brand and reputation," Chief Executive Jaakko Eskola told a conference call, apologizing for the actions.

A couple of hundred of engines had been affected by manipulated tests over several years at the Wärtsilä Delivery Centre Trieste in northeast Italy, he added, playing down the potential financial impact.

“It is to be noted that the engines in question have fulfilled the regulatory and classification society requirements, and the potentially affected vessels have met sea trial requirements,” the company said in a statement. “According to our evaluation, the customer impact of the deviations is marginal.

“Based on our current analysis, the deviations have been caused by a limited number of personnel, who have clearly acted against work instructions and our code of conduct by influencing the test results.

“These actions are in dire violation of corporate policies and the company takes the matter extremely seriously. In order to secure new and transparent processes and controls, Wärtsilä has reviewed all test procedures, and taken immediate corrective actions where deviations have been found. Consequently, we can confirm that the tests fulfil our high standards,” said the company in the statement.

"Wärtsilä requires all its employees to act in accordance with internal guidelines as well as laws and regulations,” said Eskola. “We deeply apologize for any loss in trust caused by this violation to our policies and corporate values, and we will immediately start reaching out to our customers.”

Wärtsilä’s statement is the latest evidence of increased scrutiny of practices in the transport sector after carmaker Volkswagen admitted to manipulating emission tests for diesel vehicles last year.

It also comes after fellow Finnish company Nokian Tyres last month admitted it had supplied special high quality tyres for tests by motoring journalists, leading to stronger test scores that helped to garner good publicity.

Shares in Wärtsilä fell 1.8 percent by 1130 GMT after the company said its internal audit revealed that two percent of its ship engine deliveries may have been affected by the manipulations, and the deviations in the readings were on average one percent of fuel consumption.

The company declined to specify the timeframe, or comment on possible disciplinary action relating to the wrongdoing.

Juha Kinnunen, analyst at Inderes Equity Research, however said that some customers were likely to feel aggrieved.

"For shipping customers fuel costs are a major operating expense, and a critical element in all engines deals," he said, adding however that he believed the issue should not have a significant impact on Wärtsilä.

Wärtsilä, which also makes power plants and has a large service business, said it had found no deviations in its other operations. Last year, ship engine sales represented 12 percent of the company's total revenue.