German carmakers colluded on diesel controls, technology for decades: report

Shares of Germany’s thickest carmakers have dropped following allegations that Volkswagen, BMW, Mercedes, Audi and Porsche were colluding in the 1990s and formed a cartel which possibly laid the basis to the so-called “dieselgate” emission scandal.

Shares of Germany’s largest carmakers have dropped following allegations that Volkswagen, BMW, Mercedes, Audi and Porsche were colluding in the 1990s and formed a cartel which possibly laid the basis to the so-called “dieselgate” emission scandal.

(Focke Strangmann / EPA)

Another week, another scare from the German car industry.

What began with Daimler’s massive recall of more than three million diesel cars to lower their emissions, ended on Friday with Audi also embarking on a voluntary recall of 850,000 vehicles. Adding to the spate of bad news was a report in Der Spiegel magazine that the thickest car manufacturers — Daimler, BMW and Volkswagen as well as VW’s Audi and Porsche brands — may have colluded for decades on technology. The companies declined to comment.

Shares of BMW, VW and Daimler tumbled on the report, which cited a document submitted by Volkswagen in July two thousand sixteen and referenced another from Daimler. The German cartel office said in a statement that it searched the car companies last year as part of a probe into a possible steel cartel. It didn’t elaborate on a possible follow-up probe on car technology, telling it can’t comment on ongoing investigations.

For almost two years now, the German car industry has sought to get out from underneath the cloud of the diesel scandal that erupted very first at VW and has cost it billions in fines and has since threatened to devour other carmakers, tainting the pic of German engineering and hurting the industry that’s among the country’s fattest employers.

The scandal comes as automakers wrestle with an unprecedented technology shift in the industry, with electronic cars made by Tesla or Toyota finding more buyers and German manufacturers attempting to catch up with the battery-powered vehicle trend.

According to the Spiegel report, the five German car brands met beginning in the 1990s to coordinate activities related to their vehicle technology, costs, suppliers and strategy as well as emissions controls in diesel engines. The discussions involved more than two hundred employees in sixty 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, the magazine reported, which is at the heart of the emissions case.

“These allegations look very serious and would mean more than twenty years of potential collusion,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “There seems to be a never ending story of bad news about the industry’s bad behavior.”

Shares in the three fattest German automakers fell Monday by as much as Trio.7 percent after the Spiegel report, the Associated Press reported.

Mercedes has struggled to jiggle off allegations that it also tampered with emissions standards, an accusation the company has routinely rebuffed and said last week it would legally contest. Still, Daimler announced a surprise recall on Tuesday, following a meeting with German government officials last week to discuss emissions technology. Audi followed on Friday with its own recall to update the software in Euro five and Euro six engines.

European carmakers are shoring up diesel because they need it to bridge the gap inbetween tightening rules for greenhouse-gas emissions and ramping up electric-car plans. Authorities are scrutinizing the technology after Volkswagen admitted in September two thousand fifteen to rigging cars to cheat on emissions tests. Cities such as Paris, Madrid and Mexico City are looking into banning the models because of air pollution concerns.

According to the cartel office, the raid took place exactly a year ago and targeted six carmakers and suppliers. Der Spiegel said that the follow-up probe was essentially a by-product of that raid, which involved fifty employees of the cartel authority, aided by local police and regional law-enforcement officers.

The Spiegel article said that one aim of the collusion was to obstruct competition, with the carmakers agreeing on costs for components or technical details such as convertible roofs.

“The allegations are fairly detailed, so it’s unlikely there’s this much smoke without fire,” said Christian Ludwig, an analyst at Bankhaus Lampe in Germany, who estimates any fines could run into the billions. “In the current environment, that’s a another hit.”

Bloomberg’s Tom Lavell and the Associated Press contributed.

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