Bryan Cohen Mar. 18, 2013, 4:48pm

JUNEAU, Alaska (Legal Newsline) - Alaska Attorney General Michael Geraghty announced the approval of a settlement Thursday with a German engine manufacturer and its U.S. affiliate to resolve allegations of faulty design in the state's fast ferries.

The settlement with MTU Friedrichshafen GMBH and Tognum America Inc., formerly known as MTU Detroit Diesel Inc. resolves litigation that was pending for three years.

Under the terms of the settlement, MTU will remove and replace the eight engines of the fast vehicle ferry vessels Fairweather and Chenega at no cost to the state, keep the existing engines in the fast ferries operable until the newer model engines are installed and establish an improved, mutually-beneficial working relationship between MTU and the Alaska Marine Highway System regarding servicing and engine maintenance.

"Our goal in this litigation has always been to ensure Alaska's residents have reliable ferry service," Geraghty said. "This settlement accomplishes that goal."

In 2010, Geraghty's office sued MTU, Tognum America and Robert E. Derecktor Inc., the contractor responsible for the design and construction of the ferries, after multiple problems continued to occur with the vessels' diesel engines. Derecktor declared bankruptcy in February 2012, which delayed the lawsuit and left the MTU entities as the lone defendants.

The settlement does not apply to and is without prejudice to the state's claims against Robert E. Derecktor Inc.

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