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A bad week for Germany’s carmakers

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STRENGTH and reliability were once the watchwords of Germany’s carmakers. Tardiness and scheming seem more apt terms now. Nearly two years after Volkswagen (VW) was caught rigging emissions tests, the difficulties continue to pile up. Europe is turning against diesel, and even petrol. And German firms are facing accusations of collusive behaviour, including claims of more widespread rigging of emissions tests for diesel engines.

Diesel’s days look numbered. Sales in Europe are falling fast. Before VW’s misdemeanours came to light, they accounted for over half the market in large European countries. No longer: Morgan Stanley, a bank, notes that diesel passenger cars took less than 39% of sales in Germany in June. Another bank predicts that diesel’s share will soon drop to 30% across Europe.

Dismay over premature deaths caused by pollution is one reason. The European Environment Agency says smog causes nearly half a million early deaths in Europe annually. Diesel engines are a big contributor to local pollution levels because of the nitrogen oxide they emit. Restrictions loom in cities across Europe: diesel cars are likely to be banned in Paris, London, Oslo and even perhaps in some German cities such as Stuttgart, home of Daimler.

P oliticians, who once applauded diesel engines for emitting less carbon dioxide than petrol ones, are also getting tough. Taxes on diesel cars and fuel are rising, eliminating the cost advantage to motorists. Doubt over the fuel’s future is starting to hit resale values. Some countries are putting the internal combustion engine itself on notice. France’s government said this month that sales of new petrol or diesel cars will end by 2040. This week Britain launched a “clean air strategy” with the same goal. Norway is aiming for 2025.

Carmakers are responding with promises to make only hybrids or electric cars within a few years. Volvo says it will do so by 2019. Daimler and VW have plans to make large numbers of battery-powered cars. Yet the German giants still say that diesel has a future. Their argument that an all-out war on diesel would deprive them of much-needed money to invest in new cleaner technologies has won backing in Brussels. The EU’s industry commissioner, Elzbieta Bienkowska, recently warned against a “rapid collapse of the diesel market” as a result of local driving bans.

Rapidly collapsing reputations present a different set of problems, especially after new allegations of underhand practices. A report on July 21st in Der Spiegel, a magazine, said that Germany’s big carmakers—Daimler, BMW and VW—had indulged in anti-competitive behaviour since the 1990s. The most damning claim has echoes of “dieselgate”: that the firms agreed in 2008 to install inadequately small tanks of urea, used to cut nitrogen-oxide emissions from diesel engines, in order to save cash.

Der Spiegel’s report is based on information that VW volunteered to authorities last July, in reaction to a separate probe into a steel cartel. European rules on prosecuting cartels give firms an incentive to blab: the first to admit wrongdoing is typically exempt from fines (the second gets a discount). Press reports suggest that Daimler sent information, too.

The allegations are striking. More than 60 committees stand accused of working together to fix standards and share technical information during 1,000 secret meetings. It is unclear if price-fixing took place—usual practice for a cartel. And rivals are often yoked together in alliances aimed at saving money by sharing costs for things such as engines. But internal e-mails, mentioned by Der Spiegel, suggest that managers and lawyers may have been aware they might be breaking antitrust rules. The meetings’ secrecy looks suspicious, as does the exclusion of foreign rivals.

German and EU antitrust regulators are investigating. Some politicians fret for the industry’s future, amid speculation of fines running to billions of euros. That looks premature. Confirmed facts are few. And despite the EU fining five lorrymakers €2.9bn ($3.4bn) for collusion a year ago, penalties typically fall far below the maximum permitted.

Investors are not panicking: the firms’ share prices have fallen, but only slightly. BMW has denied collusion and dodgy emissions. Daimler and VW have not commented, although they discussed the matter at swiftly arranged meetings of their supervisory boards on July 26th. But German carmakers are under more pressure than ever to dump diesel, accelerate a shift to battery-powered vehicles and quell concerns about their governance. They will have to adopt two new watchwords—nimbleness and openness.

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Julio Marchi ©

Publisher / Editor at BS News & Media Services
A free thinker, not labelled as anything, not associated with any party, not part of any group or engaged with any religion... A simple guy tired of the nowadays bullshit who decided to promote more serious debates about what is really happening hoping to bring back intelligence to the superficial and shallow news & headlines that unfortunately took over the existing media scene.
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