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The death of diesel? What the German court verdict could mean

Germany’s top administrative court has paved the way for potential bans on diesel cars in cities. Does this ultimately mean the death of diesel? Or can the beloved diesel engine adapt and survive? Diesel-guzzling car lovers need not panic just yet — you can still drive your beloved set of wheels home this evening, wherever you are. But Tuesday's ruling by Germany's top administrative court in Leipzig that diesel bans in cities are legally permissible could have deep consequences for millions of drivers and businesses in Germany and the economically critical automobile industry as a whole. While any eventual diesel bans will be limited to certain vehicles, places and scenarios at first, this ruling could ultimately prove to be a big nail in the coffin of a fuel that has powered Germans and Europeans for the best part of a century. Diesel in Germany: A potted history An American resident, long since used to that country's preference for gasoline (petrol) cars, might be surprised to learn that around one third of the more than 45 million cars on German roads are powered by diesel. The journey of diesel in its German motherland and in Europe as a whole has been remarkable. After decades of modest popularity, the diesel boom took off fully in the 1990s when technological developments such as turbo-charged direct fuel injection systems greatly improved performance and softened diesel's dirty image. Read more: Germany's air pollution: Clean up or pay up? Then in the late 1990s, European governments eager to reduce their CO2 emissions began to spend billions subsidizing diesel, as it emits far less CO2 than petrol. As well as that, car tax on diesel vehicles became far cheaper than that on petrol cars. Cheaper and far more fuel efficient, diesel became a go-to fuel for drivers in Europe. In 1990, less than 10 percent of new German cars were powered by diesel. By 2000, it was 30 percent. By 2007, it was 47.8 percent. Growing concerns over diesel's severe effects on public health, through nitrogen oxide (NOx) and particulate emissions, didn't seem to matter back then. Everything changed with the September 2015 Volkswagen Dieselgate emissions scandal. With public faith hugely damaged, the last two and a half years have been filled with little but bad news for those who love diesel. In 2017, the share of new diesel cars in Germany fell to 38.8 percent; still very high, but a dramatic fall from the 47.7 percent figure of 2015. A ban on diesel cars in German cities would surely accelerate what is beginning to look like the death of diesel. What happens now? Tuesday's ruling does not mean there is now a diesel ban in place in Stuttgart, Dusseldorf or anywhere else. However, it does mean that there is now no legal impediment to German states and municipalities banning all but the very latest diesel models (those meeting so-called ‘Euro 6' standards, introduced after September 2015) from city centers, something they will now come under massive pressure to do from environmental lobby groups such as DUH, whose legal action led to today's case. Pressure will also come from the European Commission. Almost 70 German cities heavily exceed EU NOx limits, with Cologne, Stuttgart and Munich the worst offenders. Germany needs to lower these levels fast, or else it will face huge EU fines. With diesel-powered vehicles accounting for more than 40 percent of total German NOx pollution, they will bear the immediate brunt of any emissions-reducing measures. The highly influential German automobile industry is worth close to €500 billion ($616 billion) to the German economy annually and employs close to 1 million people directly and indirectly, so car industry representatives and lobby groups vehemently oppose any bans. The German government is understandably wary of upsetting this group, or indeed the many millions of German citizens currently driving diesel cars. Nonetheless, with possible EU legal action looming over Germany's poor air quality, the government may have little option but to fully endorse and support Tuesday's ruling. Already there are strong suggestions from several politicians that the possible imposition of diesel bans will torpedo any fledgling plans, touted in recent weeks, to introduce free public transport systems within five so-called German ‘model' cities. On top of this, significant moves to ban diesels in Germany will inevitably lead to similar moves across Europe, with environmentalists and green politicians likely to crank up the pressure, already at a high pitch with Paris, Madrid and Athens all having committed to diesel bans by 2025. The longer term effects With diesel sales already on the decline in Germany, the introduction of diesel bans, however limited, would inevitably accelerate that decline according to most market analysts. Although diesel models built from late 2015 will be exempt, the damage to ‘brand diesel' will surely be profound. With more than 15 million diesel cars currently on German roads, many of them built before 2015, owners may be prompted to get rid of them as quickly as possible, potentially knocking billions off the value of the German and European car market — and slowly but surely, knocking diesels off the roads for good. The car industry itself will also ultimately have to react. Several carmakers have already committed to ending production of diesel vehicles within the next few years, with Fiat Chrysler the latest to do so, according to reports in recent days. Last summer, BMW and Audi agreed with the Bavarian state government that they could "upgrade" several diesel cars built between 2011 and 2015 with software that would reduce emissions. Read more: Opinion: Farewell to diesel cars in Germany? The prospect of a diesel ban will place such pledges under more intense scrutiny; many are likely to argue that the costs of such upgrading would be unrealistic and prohibitive. Scrappage schemes, also expensive but more definitive in resolving the diesel issue, will also increasingly come into the equation. What is clear is that the verdict of the court in Leipzig is going to blow a powerful gust of change into the already turbulent world of diesel usage in Germany and beyond. Precisely what will happen to diesel cars over the next few years remains to be seen, but bans or no bans, it is hard to see how diesel can ever return to the intoxicating position it once occupied.

Germany’s top administrative court has paved the way for potential bans on diesel cars in cities. Does this ultimately mean the death of diesel? Or can the beloved diesel engine adapt and survive? Diesel-guzzling car lovers need not panic just yet — you can still drive your beloved set of wheels home this evening, wherever you are. But Tuesday’s ruling ... Read More »

EU regulators raid auto giant BMW in German cartel case

The bloc's anti-trust officials have searched the offices of the premium carmaker this week in a probe investigating BMW and four other German automobile firms for suspected anti-competitive practices. BMW confirmed on Friday that EU anti-trust regulators had searched its offices in Munich this week, after the European Commission had earlier in the day refused to name the company involved. The EU, in its statement, said that the inspection related to the Commission concerns that several German car manufacturers may have violated EU antitrust rules that prohibit cartels and restrictive business practices. "Inspections are a preliminary step in investigations of suspected anti-competitive practices. The fact that the Commission carries out inspections does not mean that the inspected companies are guilty of anti-competitive behavior, nor does it prejudge the outcome of the investigation itself," the Commission added. A group of leading German carmakers including Volkswagen, Porsche, Audi, BMW and Daimler stand accused of holding illicit meetings since the 1990s to coordinate vehicle technology, cost, suppliers, markets and strategy. Daimler comes clean In July, German media reported that the cartel's secret working groups hashed out and decided the most important details of the auto business, including the inadequate size of the AdBlue tanks that could not adequately feed their diesel cars' exhaust treatment. One of the aims of the cartel was to avoid "an arms race" of AdBlue tank sizes. Meanwhile, the cartel case has turned into a race for who rats out whom first. Luxury carmaker Daimler on Friday confirmed it had applied for the status of principal witness in the EU probe. Daimler chief financial officer (CFO) Bodo Uebber told journalists that the application "principally concerns coordination in breach of anti-trust legislation which was discussed in the press a while ago." As it was yet unclear whether the EU opened an official investigation into the carmaker, Daimler saw "no need presently to make financial provisions for any possible fines," Uebber added. Rat-out-race According to German media reports, Volkswagen had also attempted to apply for the principal witness status. But Daimler was first in coming clean with Germany's and Europe's cartel watchdogs, and it could avoid a multi-billion euro fine. Volkswagen's voluntary declaration is dated July 4, 2016, but Daimler's came significantly earlier. Still, Volkswagen could get a rebate on the punishment. BMW, one of the least suspicious in diesel emissions fixing, is kept holding the bag. BMW has said from the outset that there is nothing unusual in working with other carmakers on certain components if they "do not contribute to differentiation of the two brands and are therefore not relevant to competition." According to EU law, the first co-operating co-conspirator in an anti-trust matter could walk away unpunished. The second one to break the silence would get a maximum 50 percent rebate, but only if "evidence with considerable value-add" will be delivered.

The bloc’s anti-trust officials have searched the offices of the premium carmaker this week in a probe investigating BMW and four other German automobile firms for suspected anti-competitive practices. BMW confirmed on Friday that EU anti-trust regulators had searched its offices in Munich this week, after the European Commission had earlier in the day refused to name the company involved. ... Read More »

VW manager pleads guilty in US ‘dieselgate’ case

A Volkswagen (VW) manager, currently jailed in connection with the German automaker's emissions scandal in the United States, has pleaded guilty in a Detroit courtroom, hoping for lesser punishment. US prosecutors confirmed Friday that charges against Volkswagen executive Oliver Schmidt would be reduced after he pleaded guilty to his part in covering up the German carmaker's "dieselgate" emissions-cheating scandal in the US. Schmidt, who led the German automaker's US regulatory compliance office until 2015, appeared in a Detroit court to enter his plea. He had pleaded not guilty before his change of mind. US prosecutors said they would drop a wire fraud charge, which carried a maximum penalty of 20 years in prison. But they retained a fraud conspiracy charge and a charge of violating the US Clean Air Act, which together carry a maximum sentence of seven years. Also under the plea agreement, Schmidt may have to pay a fine of between $40,000 (34,000 euros) and $500,000. The final verdict is due December 6, 2017. In 2015, VW admitted it had equipped about 11 million cars worldwide with defeat devices to evade emissions tests, including about 600,000 vehicles in the United States. Diesel cars marketed as clean were in fact emitting 40 times the permissible limits of nitrogen oxide during normal driving. Altogether eight managers from the German car group are facing charges by US authorities for the company's breach of emissions regulations. Many of the other managers charged are believed to be in Germany, making extradition to the US unlikely. Schmidt was the second VW employee to plead guilty, after former company engineer James Liang admitted last year to helping devise the defeat devices. An FBI affidavit cited him as a cooperating witness. In March, VW agreed to pay $4.3 billion in penalties after pleading guilty to conspiring to violate the US Clean Air Act. That was on top of $17.5 billion in civil settlements. The carmaker still faces an array of legal challenges in Germany and worldwide, and has so far set aside more than 22 billion euros to cover dieselgate costs.

A Volkswagen (VW) manager, currently jailed in connection with the German automaker’s emissions scandal in the United States, has pleaded guilty in a Detroit courtroom, hoping for lesser punishment. US prosecutors confirmed Friday that charges against Volkswagen executive Oliver Schmidt would be reduced after he pleaded guilty to his part in covering up the German carmaker’s “dieselgate” emissions-cheating scandal in ... Read More »

Volkswagen bets on e-cars, self-driving vehicles

Volkswagen unveiled a plan for the next decade containing culture change, as it strives to compete in an industry moving towards e-cars, self-driving systems and on-demand mobility - all while it deals with Dieselgate. The implementation of the plan, dubbed the "Together Strategy 2025," will see "double-digit billion investments," according to VW CEO Matthias Müller at a press conference at the company’s headquarters in the German town of Wolfsburg. Müller admitted to the company having had its "major weaknesses exposed" in the wake of the "shake-up" from the scandal about it having fitted 11 million of its diesel cars with emissions test cheating software. "The catchwords here are structure, culture, efficiency," said Müller. Later, he said "the current crisis is a catalyst for us. Readiness for change has grown considerably." The famously autocratic management style of Müller's predecessor Martin Winterkorn is considered by many to have been one of the factors that led to the cheating. VW engineers and technical staff found themselves under pressure to push the carmaker all the way to the top of the industry. This time, Müller has announced an effort to "establish a culture that is open and value-driven." Apart from changing its corporate culture, Müller is also seeking a "massive transformation" of VW's core business of developing and building vehicles, based on driving forward innovation - some of it outsourced. "We will harness outside impetus by relying on acquisitions on venture capital investments in the future," said Müller. "We no longer have the illusion we can do everything better or by ourselves. For an engineering-driven company such as ours, that's a paradigm shift." E-cars, driverless cars Volkswagen announced that it would launch more than 30 battery-powered electric vehicles over the next 10 years, and that it was anticipating sales of 2 to 3 million e-cars by 2025 - or around 20 to 25 percent of total sales volume. Müller said battery technology would have to be among its core competencies if that's going to be become a reality. At the moment, e-car manufacturers rely heavily on external battery producers. And fully autonomous cars with self-driving systems also figure prominently in VW's unveiled strategy, with VW's own in-house developed model targeted for a market launch in 2021, helped along by 1,000 additional software specialists to be added to the carmaker's workforce. "We are making autonomous driving and AI core technologies of the VW Group," said Müller. The move comes as competition heats up from tech companies crossing over into the auto industry, such as Google and Apple. Ride-hailing The carmaker is also seeking greater relevance in mobility services solutions, setting up a specialized business unit to be headquartered in Berlin. First inroads into the mobility services business were made via its $300 million (267 million euro) investment in ride-hailing app Uber's rival Gett. Müller called it the nucleus of VW’s expansion in the area, aimed at bringing in multibillion-euro revenues by 2025. "The cars will have to come from somewhere, and they will have to come from us. We are working on setting up strategic networks that depend on us," said Müller. "The first step has been taken with Gett, as far as ride-hailing is concerned, we have bet on the right horse." Volkswagen is targeting a 7 to 8-percent profit growth by 2025, which Müller called "appropriate, ambitious, and at the same time realistic." The payout to shareholders is to be maintained at around 30 percent of net profit, he said. In April, VW posted its first annual loss in more than two decades for 2015, after setting aside over 16 billion euros to cover potential costs relating to the emissions scandal. In the first quarter of this year, the 12-brand group saw net profit slump 20 percent to 2.31 billion euros.

Volkswagen unveiled a plan for the next decade containing culture change, as it strives to compete in an industry moving towards e-cars, self-driving systems and on-demand mobility – all while it deals with Dieselgate. The implementation of the plan, dubbed the “Together Strategy 2025,” will see “double-digit billion investments,” according to VW CEO Matthias Müller at a press conference at ... Read More »

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