Posted on 07/25/2017 8:26:16 AM PDT by Kaslin
Unmasking an Illegal Cartel
The German auto scandal just got much bigger according to a new report by the Spiegel.
Audi, BMW, Daimler, Volkswagen, and Porsche colluded in all aspects of diesel technology.
Effectively, the five corporations acted as one via a series of secret working groups that met several times a year.
The Spiegel broke the story with its report on the Auto Syndicate Scandal.
The story is in German, and it’s also behind a pay wall. Eurointelligence has a nice Email report.
Spiegel magazine has an absolutely shocking account of a cartel between the five motor companies – VW, Daimler, BMM, Porsche, and Audi. The original article is worse than any summary we have read because of the many details the two authors have dug up in a large investigation. Coming on top of the diesel emissions scandal, the reputation of the German car industry has been reduced to that of a criminal organization. Unlike the authors, we are less worried about the fines, which will be large, than about the long-term commercial impact.
This is one of the largest cartel cases in German history. The meetings started in the 1990s. The car makers created 60 working groups, each specializing on a different part of the car. For example, they agreed on the maximum speed at which a sunroof opens or closes while the car is in motion, or the maximum size of the tank for the AdBlue chemical which reduces certain toxic emissions. There were working groups for brake systems, for seats, for suspension, for clutches, and naturally also for diesel and petrol engines.
The working groups met several times a year in the cities where the car companies have their HQ’s, like Munich, Stuttgart, or Wolfsburg; as well as during the large European motor shows in Frankfurt, Geneva, and Paris. They also held teleconferences in between meetings. They were quite cocky. An Audi email reads:
“Hello everybody, please find attached the date for the ‘secret’ meeting in Munich.”
The authors, two of Germany’s most renowned business journalists, said the cooperation has gone so far that these companies can no longer be regarded as in competition with one another but as a single Deutsche Automobil AG.
All the companies, except BMW, have admitted the meetings when questioned by the EU Commission and the Federal Cartel Office.
When industries decline, this type of behavior is very common in the penultimate phase. The industry profits are still high. The companies are still benefitting enormously from past inventions and product developments. As we now know, the German car industry was able to maintain their predominance beyond the natural sell-by date through a cartel. They are approximately at the same stage where Detroit was just before 1967.
The problem with the German car industry specifically is that they bet the house on diesel technology, and used their influence on the German government to prevent more stringent testing of emissions. The function of the cartel was to maintain profit margins, and in particular to secure the predominance of the diesel technology.
The German public had an extraordinary degree of trust in the industry, partly also because German auto journalists failed to do their job since they were part of the cartel.
The next ten years will see two significant developments, for which the German car industry is not prepared: one is the gradual switch towards hybrid and electrical engines, and the other is the advent of artificial intelligence. The German car industry has a lot of patents for electric engines, but they are globally not the leading force. And now their reputation is tarnished.
We don’t expect rapid falls in sales immediately but see an unrecoverable loss of reputation in the long-term because we are confident to predict that the industry will not clean up the mess it has created. Rather, it will seek a cover-up or direct protection from the government. The tendency will be to sit this out, and the government will avoid an open confrontation given the many jobs that depend on that industry. This may delay the onset of a crisis for a while, but will ultimately accelerate it.
Merkel to the Rescue?
Massive fines are on the way but Merkel will do whatever she can to reduce the fines and the impact.
The amazing thing to me is how long these corporations got away with this.
Trust is lost and diesel is toast. The latter was true even without this latest scandal.
Ach, du leibe!
Gott im Himmel!
“Diesel is toast”.
Over 50 percent of European cars are diesel.
https://www.statista.com/statistics/425113/eu-car-sales-share-of-diesel-engines-by-country/
If diesels are toast, then bring more butter. They ain’t going anywhere.
Heiliger Strohsack!
I found that out the hard way when I rented a car in Spain recently.
Oh no!, I feel sooo bretrayed that I’m going to dump my tunned A4...
Hardly surprising. I wouldn’t be surprised if the Japanese and, yes, even the Once Big Three, are doing the same. I guess it’s a fine line between “industrial standards” and cartel behavior. They still have to compete with other European, Japanese, Korean and American car manufacturers.
The German govt was a silent partner in the conspiracy. The EU emmisions regulations were used as a non tariff barrier to the advantage of the German diesel and car makers. The next shoe to drop will be the conspiracy of heavy duty truck and equipment manufactures.
I liked my euro-rental... Ford C-Max "Eco-Torque" turbodiesel 5-speed stick. Wish they'd import that powertrain, rather than the hybrid B.S.
Correct. The USA is not alone in imposing ridiculous and oppressive standards regarding emmisons. Europe has these rules also. And diesel auto companies MUST manipulate and game the system if they want to stay in business.
Couldn’t happen to a nicer bunch. I hope that the “Nazi Thunderbird” is dead. These companies are all “green” on the outside, and “red’ on the inside.
Ach du Liebe, na so was.
Germany
I’m surprised they have any economy at all...
the loss of tourist dollars and pounds sterling must be a big hole for them ...
whats the rest of their trade like...
Genau!
I’ve never heard that expression, and German is my native language. Probably depends on the area.
Another example is a work done to agree on a standard plug for the charging electrical cord for plug in hybrids.
It maybe that the Germans did not use the proper legal form of joint venture / partnerships to address these issues.
Right after I dump my TT 225 BHP?
Hmm. IIRC, companies in Europe such as Groupe PSA (Peugeot, Citroen, etc.) have an arrangement with American automakers where diesel power is concerned. Ford (for example) ships large diesel engines to Europe for use in delivery trucks while PSA ships light diesels to Ford of Europe for its automobiles.
Other similar trade agreements may be woven into this mess and may be attacked in the media as methods to circumvent environmental standards and other nonsense.
Industry developed standards are a bad thing?
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