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Detroit Diesel Announces EPA/CARB Agreements

22 October 1998

Detroit Diesel Announces EPA/CARB Agreements; Projects Stronger Third Quarter Operating Results

    DETROIT, Oct. 22 -- Detroit Diesel Corporation
announced today that they, along with other diesel engine manufacturers
including Caterpillar Inc., Cummins Engine Company, Inc., Mack Trucks, Inc.
and Volvo Truck Corporation, have entered into agreements with the
Environmental Protection Agency (EPA), and the California Air Resources Board
(CARB) to accelerate the implementation of emission standards originally
scheduled for 2004 by fifteen months.
    For several months, these engine manufacturers, including DDC, have been
in discussions with EPA and CARB regarding the levels of oxides of nitrogen
(NOx) emissions from heavy-duty trucks under certain driving conditions.  The
engine manufacturers have agreed with EPA and CARB to enter into agreements
which will serve to further accelerate lower NOx emission standards previously
established by EPA and CARB for both on-highway and non-road applications, and
increase testing procedures relative to the emission standards.  The
manufacturers also have agreed to modify the electronic engine control
strategies, provide for certain other projects aimed at further reducing NOx
emissions and pay a civil penalty.
    "Reaching this agreement makes sense for the industry and the nation,"
said Ludvik F. Koci, Vice Chairman.  "We strongly believe that the engines
Detroit Diesel has produced over the years have met regulatory standards and
guidelines.  Detroit Diesel is a pioneer in the use of electronic controls for
diesel engines to reduce emissions and a leader in improving diesel engine
fuel performance.  While we do not agree with the agencies' concerns regarding
our products' compliance under certain driving conditions, we felt that it was
in the best interests of our customers, shareholders, suppliers, and employees
to resolve this matter by these agreements.  This compromise avoids the costs
and uncertainties that would result from protracted and complex litigation."
    Solely as a result of the terms of the agreements, the Company will take
an after-tax charge of $12.5 million, or $.51 per common share, against third
quarter 1998 earnings.  No further charges are expected in the future in
relation to this matter.
    As a result of the agreements, the Company has also committed to advanced
research and development activities over the next five calendar years to
generate further emission reductions.  These expenditures will be undertaken
as a part of the Company's continuing environmental research and development
efforts and are well within forecasted expenditures for emissions compliance.

              STRONGER PROJECTED THIRD QUARTER OPERATING RESULTS

    The Company also announced that its earnings for the third quarter are
expected to be between $.40 and $.42 per share, a more than 20% improvement
over third quarter 1997 results, excluding the effect of the EPA/CARB.  The
third quarter operating performance reflects further improvements in the
Company's cost control efforts and a focus on the profitability of key
products.  The Company will formally announce its third quarter results on
October 28, 1998.
    Detroit Diesel Corporation is engaged in the design, manufacture, sale and
service of heavy-duty diesel and alternative fuel engines, automotive diesel
engines, and engine related products; and provides financing through Detroit
Diesel Capital Corporation.  The Company offers a complete line of diesel
engines from ten to 10,000 horsepower for the on-highway; off-road;
automotive; and power generation markets.  Detroit Diesel services these
markets directly and through a worldwide network of more than 2,500 authorized
distributors and dealers.  DDC is a QS-9000 certified company.
    Detroit Diesel's major shareholder is Penske Corporation, a closely-held,
diversified transportation services company whose operations include Penske
Truck Leasing Company, Diesel Technology Company, Penske Automotive Group,
Inc., Penske Auto Centers, Inc., Penske Motorsports, Inc., and Penske Capital
Partners.  The Penske Group of businesses has annual revenues exceeding
$6 billion and employs more than 28,000 people around the world.
    This news release may include projections, forecasts and other forward-
looking statements about the Company, the industry in which it competes and
the markets it serves.  The achievement of such projections is subject to
certain risks and uncertainties, fully detailed in the "Cautionary Statement
for purposes of 'Safe Harbor' under the Private Securities Act of 1995" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
which is on file with the Securities and Exchange Commission.