Car makers in Germany face up to scandal
• Battered Volkswagen among first to break ranks
German car makers faced a brewing scandal on Monday as suspicions grew that they had colluded illegally for decades, further damaging the industry’s image and exposing it to huge financial risks.
News weekly Der Spiegel reported on Friday that German car makers Volkswagen, Audi, Porsche, BMW and Daimler had secretly worked together from the 1990s onwards on huge areas of car development, construction and logistics — including how to meet increasingly tough emissions criteria in diesel vehicles.
Both buyers and suppliers of the car giants suffered from the under-the-table deals, the magazine alleged.
For the world’s largest car maker, Volkswagen, the diesel emissions scandal alone has already cost tens of billions of euros since it admitted to cheating on regulatory tests in 2015.
That is likely to be why the Wolfsburg-based firm, along with Mercedes-Benz parent Daimler, was one of the first to hand over details of the alleged broader collusion between the five firms to competition authorities, reported Spiegel, saying it had seen a Volkswagen document submitted to them.
Regulators often treat the first company to report such infringements more leniently than the rest. And Daimler has experience: it suffered a €1bn fine from Brussels last summer after agreeing on prices for its trucks with three European competitors.
In theory, the maximum fine from the European Commission or Germany’s federal competition authority could reach 10% of a firm’s revenue — close to €50bn across all five car companies, based on 2016 sales. On top of that would come individual claims from customers.
Many buyers could have paid “a price that was far too high” for their vehicles, Klaus Mueller of the VZBV consumer federation said on Monday.
Both Brussels and German authorities said that they have received information on the possible agreements between the companies.
These are now “undergoing examination by the Commission”, the EU’s executive arm said on Saturday, while adding that it would not “speculate further” on the outcome.
Volkswagen has said nothing, although its supervisory board is set to meet on Wednesday, while Daimler insists that it applies an internal competition law compliance programme.
Munich-based BMW on Sunday denied any collusion with competitors, adding that none of its vehicles had been manipulated to meet diesel emissions norms.
Among the areas Spiegel reported manufacturers collaborated on in its Friday report was the size of tanks for a liquid known as AdBlue, used to treat diesel exhaust fumes.
The fluid reacts with harmful nitrogen oxides found in the emissions and transforms them into water and nitrogen.
But car makers agreed not to add large reserves of the additive to their vehicles, Spiegel reported, preferring to save space for customers’ golf bags or profitable upgrades such as speaker systems.
Rather than call on drivers to refill the tiny AdBlue tanks every few thousand kilometres, Volkswagen built systems into millions of vehicles that reduced exhaust treatment unless software detected the car was undergoing a regulatory emissions test.
Other manufacturers including Daimler are suspected of doing the same.
“If this turns out to be true it would cost tens of billions of euros altogether and single-digit billions for each manufacturer,” said analyst Frank Schwope of Nord/LB bank.
The reports have spooked investors, with car industry stalwarts trailing on the DAX index of blue-chip German shares on Monday.
Daimler was the worst performer, with its stock losing 3.4% in afternoon trading.
“In the context of the diesel scandal, forbidden agreements are a kind of total meltdown for the credibility of the German car industry,” said Stefan Bratzel of the Centre of Automotive Management near Cologne. In the political arena, legislators are gearing up for an election in late September and cannot leave the car industry theme untouched.
“Of course, everything must be uncovered unsparingly,” a spokeswoman for Chancellor Angela Merkel told journalists in Berlin on Monday — while insisting that the work of the competition authorities remains independent of the government.
Centre-left challenger for the chancellery Martin Schulz warned that if the allegations prove true, “it would be a gigantic fraud at the expense of customers and suppliers, many of them small- and mediumsized businesses”.
IF TRUE, IT WOULD BE A GIGANTIC FRAUD AT THE EXPENSE OF CUSTOMERS AND SUPPLIERS, MANY OF THEM BUSINESSES