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German car industry under EU cartel investigation

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The diesel scandal surrounding Audi, BMW, Mercedes-Benz, Porsche and Volkswagen has taken a further twist with news that the EU has opened an investigation into claims the five German car makers worked together to set standards and collaborate on software manipulation methods for diesel engine development in secret meetings. One of these meetings allegedly took place on the sidelines of the 2010 Paris motor show, Autocar (UK) understands.

Acting on evidence provided by a former Volkswagen employee, the EU has opened the cartel investigation following claims that up to 200 employees from Audi, BMW, Mercedes-Benz, Porsche and Volkswagen were involved in the secret, closed-door meetings. During these encounters, the German car makers are said to have swapped vital information on methods to circumnavigate test procedures for CO2 and particulate emissions as well as SCR (selective catalytic reduction) thermo switching, among other manipulations.

Said to have taken place since the 1990s, the talks are also claimed to have involved a consensus on the size of AdBlue urea tanks, with Audi, BMW, Mercedes-Benz, Porsche and Volkswagen all agreeing to keep the tanks under a certain capacity to aid packaging compared with other car makers' diesel systems.

The decision to limit the size of AdBlue tanks, which are used to inject urea in exhaust after-treatment systems to lower tailpipe emissions, is said to be behind moves first introduced by the German car makers towards so-called thermo switching. In theory, this process would involve the SCR (selective catalytic reduction) tank being switched off both below and above certain temperatures to ensure the AdBlue mixture is not depleted, albeit at the expense of CO2 and particulate emissions.

Audi said it won't be "commenting further until after the Diesel Summit involving the German government on August 2" while at the time of going of writing, the remaining four car makers had yet to respond to Autocar’s request for comment.

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For more than 20 years, the German auto industry has been operating like a cartel, according to a new "bombshell" report, which has sent the shares of Germany's biggest automakers reeling, reported Zero Hedge.

Spiegel is reporting that the big three German car companies – Volkswagen, Daimler and BMW - have been holding secret “working groups” since the 1990s, where they would discuss, production costs, suppliers, strategy and – importantly – emissions purification. The meetings were initially reported to regulators by Volkswagen in a filing with German competition authorities. The magazine described the meetings as “one of the biggest cartel cases in German economic history.”

It was at these meetings that the companies agreed on the appropriate gas purification standards for their diesel vehicles, thus laying the groundwork for the diesel scandal that has resulted in massive fines for these companies both in Germany and the US. The working groups also selected suppliers, helping to set costs for vehicle components. The ongoing discussions allegedly involved more than 200 employees in 60 working groups in areas including auto development, gasoline and diesel motors, brakes and transmissions. Talks may have also involved the size of tanks for AdBlue fluid for diesel autos, according to Bloomberg.

The allegations are guaranteed to result in more fines for the automakers, which were just beginning to move on from the diesel emission scandal that rocked the industry.

“These allegations look very serious and would mean more than 20 years of potential collusion,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler told Bloomberg. “There seems to be a never-ending story of bad news about the industry’s bad behavior.”
As Bloomberg explains, European carmakers are shoring up diesel as they need it to bridge the gap between tightening rules for greenhouse-gas emissions as they invest in ramping up electric-car plans.
The Spiegel report followed announcements by Audi and Mercedes this week that they’re recalling diesel vehicles to update pollution-control software amid probes by environmental authorities into potential emissions violations.

German authorities first became aware of the problem when they raided Volkswagen’s offices last year, searching for evidence that the company sought to rig steel prices. Instead, it found evidence of collusion between German automakers. Two weeks later, VW submitted a voluntary admission to antitrust authorities, as did Daimler in hopes of minimizing penalties.

Following the report, which assures billions more in settlement costs and litigiation fees are coming, the shares of Germany's Big-3 have all tumbled on the news.

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