German OEMs: 20-page article in Spiegel regarding potential cartel
Two hours ago, Spiegel published a ~20 page article named "Das Auto-Syndikat” (http://www.spiegel.de/spiegel/) about ongoing collaboration among the German OEMs. The article claims that the Dieselgate scandal was a result of a long-term collusion of all three OEMs. Spiegel cites various emails that have been sent between competing carmakers. These are some of the accusations:
- German carmakers were coordinating the development of their vehicles, costs and suppliers at least since the 1990s up to now
- Back in the 1990s, these were regarded as harmless rule violations
- OEMs work together in working groups such as: Drive, Body, Chassis, Electronics, Complete Vehicle
- Over a 1000 meetings took place in the past 5 years
- German OEMs have collectively decided to cut off a supplier ZF for a particular component
- VW and Daimler reportedly acknowledged these accusations to the EU Commission and the Federal Cartel Office
- VW was the whistle-blower in order to avoid being fined. According to the EU antitrust law, whistle-blower’s fine can be reduced by up to 100%. This was the case with MAN Trucks which paid no fine in the recent “Truck Cartel”. At that time, the total fines given were €2.9bn.
Most of the article claims that the Diesel-gate is not a conscience. It states that the German OEMs collaboratively push through the diesel technology rather than hybrid technology early on. They were aware that NOx emissions are significantly higher, but they didn’t have any expertise in hybrid powertrains. The three OEMs had numerous meetings about Euro 6 AdBlue liquid tanks. AdBlue is a urea-based chemical that is used to substantially decrease NOx emissions in the exhaust system. According to Spiegel, the salespeople pushed the engineers to use a small 8-litre tank for all applications in order to keep enough space in the car for high-margin optional extras. These tanks were to be produced by only two suppliers at most.
In March-2011, companies found out that in the real world, 8 litres of AdBlue liquid only lasts for 2000-3000 kilometres, not enough to last until the next service. This ultimately forced VW to use defeat device which used AdBlue liquid in necessary amounts only during lab-testing, but not during real-world driving. According to the article “there was an exchange of proprietary, competitively sensitive technical data, as Volkswagen reported in its appeal to the cartel guards. The five manufacturers had jointly defined "technical standards" and agreed to use "only certain technical solutions" in new vehicles.”
It is difficult to judge from our seat if any of these statements are true. For the sake of argument, if this is true, it seems that VW decided to “come clean” in the aftermath of the diesel scandal in order to avoid paying further fines. As we can see from the table below, whistle-blowers can cut their calculated fine by up to 100%.
We have spoken to all three OEMs when a short version of the Spiegel article came out this morning. None of the carmakers were able to comment. We have also spoken to the German Cartel Office who told us that they cannot comment on ongoing cartel cases but have confirmed that six offices were searched in June-2016 in relation to “Steel Purchasing cartel” which still has not been concluded. Given the OEMs will start reporting their 2Q numbers next week, it is likely that they will comment on this Spiegel article over the weekend.
VW seems to be the best position OEM here as in theory, their fine could end up being zero. Since Daimler followed (according to the article), their fine could be reduced by up to 50%. According to the legislation, the overall size of such fine can reach up to 10% of last year’s revenues.