There were huge accusations that made the German industry tremble: In July 2017, it became known that the EU Commission suspected a cartel of German car manufacturers. Among other things, it was about exhaust gas purification systems: together, the German carmaker Volkswagen including its subsidiaries Audi and Porsche as well as Daimler and BMW would have prevented particle filters for gasoline engines, but also paved the way for the diesel scandal. As a result, EU employees combed massive amounts of data from the corporations in search of clues and evidence.
Now the EU Commission has the procedure with an expensive comparison ended – but the allegations have also been scaled back significantly. Competition Commissioner Margrethe Vestager said that the automobile manufacturers actually had technologies at their disposal to reduce diesel emissions beyond the legally required level, but they avoided the introduction by mutual agreement. “So today’s decision is about how legitimate tech collaboration went wrong,” Vestager said. “And we don’t tolerate companies making agreements.”
BMW therefore has to pay a fine of 373 million euros, the VW group, which had reported itself as the second key witness, receives a discount and pays 502 million euros. Daimler does not have to pay anything because the company was the first tipster in the process. The manufacturers point out, however, that the procedures discussed were never implemented – but this does not fully help, because the relevant discussion alone is considered an illegal appointment.
From BMW’s point of view, the EU has “largely” dropped the allegations. In fact, there was now a fine of 1.4 billion euros in the room. The reduction in the amount of the fine is seen in Munich as a late, if still expensive, satisfaction. The Munich always refused to submit a voluntary disclosure. After extensive internal investigations, they were soon convinced that they were free from guilt. You accept the fine because you may have spoken too openly, explains the Munich-based carmaker, who also attaches importance to one thing: “In contrast to its competitors, the BMW Group never considered reduced and illegal emissions control.”
In an Adblue film it was written: “Common understanding of ‘small tank’ agreed”
It all took its course in so-called “strategy circles” that were held between the mid-1990s and 2014. Internal documents from the VW group document how extensive this secret cooperation was, which was also known as the “circle of five”, and how detailed it was. When the so-called SCR catalytic converter for diesel cars was being discussed, more than 100 representatives from the five companies sat in several working groups. The SCR-Kat works with an additive called Adblue, which plays a major role in the emissions scandal. The agent removes nitrogen oxide emissions that are harmful to health and the environment.
What was discussed in the confidential rounds was in part anything but harmless. One of the strategy papers states that refueling the Adblue containers is “not particularly opportune for the premium vehicle segment” because people there have a “requirement for comfort”. In plain language: Anyone who bought expensive cars shouldn’t be bothered with Adblue, this sticky mixture of water and synthetic urea. In the VW group in particular, large luggage compartments and space-consuming sound systems were more important for well-paying customers than large tanks for Adblue and effective exhaust gas cleaning. This was also discussed in the strategy circles. One slide says: “Common understanding of ‘small tank’ agreed”.
Such topics were discussed not only in disdainful meeting rooms at corporate headquarters, but also on the fringes of luxury auto shows. For example in early October 2010 in Paris. There it was about new emission standards and the preparation of a presidium meeting of the Verband der Automobilindustrie (VDA). It is also revealing what is noted in a paper for the Paris meeting: “No logging and documentation of the details!” That did not speak for noble intentions. The EU is now judging: something like this is illegal.
The truth, however, also includes two other aspects: Even according to the authorities’ knowledge, BMW did not participate in the exhaust gas fraud. Another important and understandable concern of the car manufacturers was to persuade the mineral oil industry to set up a comprehensive Adblue tank network. The car companies spoke to Exxon, Aral / BP and Shell, and the reactions are said to have been sobering in part. A mineral oil company is said to have said that there was “no money to be made” with it. That is also in the documents from the VW Group.
After the diesel scandal was exposed, the togetherness turned into the opposite
The secret rounds were not an exhaust gas fraud cartel, as the consequences of the diesel scandal show. The VW group, including its daughters Audi and Porsche in Germany, had to pay a fine of more than 2.3 billion euros for manipulated vehicles in the emissions scandal. Worldwide there are more than 30 billion euros in fines and damages. It was also expensive for Daimler: 870 million euros in fines in Germany and more than two billion dollars in fines and damages in the USA. There are still several claims for damages from customers in Germany against both of them. BMW is completely different: the Munich-based carmaker had to pay a fine of 8.5 million euros in Germany for faulty emission control systems in several thousand vehicles. The Munich I public prosecutor’s office encountered sloppiness, but not fraud. And in the USA the authorities found nothing at BMW that could have punished them. So there was no emissions scandal among the people of Munich; in contrast to Volkswagen in particular, but also to Daimler.
For this reason, too, the togetherness turned into the opposite after the allegations became known: BMW felt that it was betrayed by Daimler in particular. A purchasing partnership was actually maintained for standard parts in order to save money, and joint developments were also discussed again and again. That was suddenly over in July 2017. “The trust is totally damaged,” said BMW manager. There was talk of being “in the middle of a tsunami”. The purchasing cooperation was immediately put on hold, as was the cooperation on car sharing services that was already planned at the time. Only after several months was a reasonably normal level of conversation found again.
However, it is questionable how companies should proceed with new technology projects. For the first time, the EU Commission has imposed fines for technical agreements – so far it has always been about markets and prices. But the need for coordination is actually increasing: whether autonomous driving or cell factories for battery cars – the technology is advancing so quickly that no company can go into the future successfully on its own.
From industry circles it is said that it would be necessary to create a clear legal framework to what extent discussions between competitors are possible in the future. “Instead of a fine, it would have been more productive for the automotive industry to issue clear guidelines on how the European Commission believes that research and development can be designed in a way that complies with antitrust law,” said the VW Group, which still reserves the right to appeal. Otherwise the existing legal uncertainties could become a stumbling block for innovations in Europe. In fact, in many fields the EU would like to see intensive industrial cooperation in order to be able to hold its own against competition from China and the USA.
The current fines are lower overall than in two other cases in the automotive industry. In 2016, the EU imposed a record fine of almost three billion euros on truck manufacturers for illegal price fixing. Daimler had to pay the most, more than a billion euros. The VW subsidiary MAN got away as a key witness without a fine; like Daimler now at the secret meetings of the car companies. Incidentally, along with consumers, they have already been victims of a cartel: four manufacturers of automotive glass had to pay a total of 1.4 billion euros in 2008 because they had secretly negotiated prices and the division of markets and buyers for years. The EU found that the auto glass manufacturers had betrayed the automotive industry and vehicle buyers.