Talk about the biggest auto warranty news, DaimlerChrysler AG backs off from the court case between them and Mercedes by paying a large sum of $1.2 million.

The automaker went into a new agreement with the Justice Department according to which they will have to monitor the emission problems in the cars and follow it up with constant reports to the government. In addition, they have to visit the court on regular basis to update the authorities about the upgrades.

It all started in the year 1998-2000 when the lawsuit involved emission-related defects in some of the most popular Mercedes vehicles. The allegations heated up when according to the Justice Department Mercedes did not inform the EPA about following problems within 15 days of their arrival.

• Airflow sensors were defective

• Catalytic converters didn’t work properly

• Air pumps and some other parts were not up to the standards.

The lawsuit defends by giving examples of large number of vehicles with emissions problems. The company has stopped the production of some of the defective parts and has increased warranty on others.