'Deceived Customers'

Merkel Spanks Car Industry For Dieselgate

Chancellor Angela Merkel listens to VW CEO Matthias Müller at the Frankfurt auto show. Source: Reuters

With an election campaign underway and many Germans furious over the unfolding scandal surrounding diesel cars, Chancellor Angela Merkel probably wished she could be somewhere else Thursday than at the opening of the Frankfurt auto show.

Although she has been close to the car industry in the past, she adopted a fairly hard line on the industry in her opening remarks at the car industry’s premier event, which is held every two years. Last time the scandal had not erupted. This time, she correctly judged the mood of the country to be angrier.

“Car companies have not only damaged themselves, but above all deceived and disappointed consumers,” she said. “The industry must do its utmost to win back credibility and trust as soon as possible, in its own interest and the interest of its employees and Germany as a whole.”

“The car industry must do its utmost to win back credibility and trust as soon as possible.”

Angela Merkel, German chancellor

Ms. Merkel was careful to throw a few bouquets in the carmakers’ direction, welcoming their efforts to produce electric cars, saying the firms need to invest more than ever in new technologies to prevent cities from adopting bans on diesel cars. “Especially in the transport sector, there is no way around change,” she said.

German environmental group Umwelthilfe has sued authorities in Stuttgart and Munich, home to Mercedes producer Daimler and BMW respectively, to have diesel cars banned from the city center because of the pollution they produce. The scandal has mushroomed beyond test cheating and has now entrapped the major carmakers in a European-wide investigation into potential cartel violations for agreeing prices and technology for dealing with diesel emissions.

As a result, Ms. Merkel’s government hastily convened a “diesel summit” a month ago and agreed to set up a transit fund to provide €500 million ($595 million) to cities to pay for non-polluting vehicles like buses and garbage trucks. Half of the money is supposed to come from the car industry, but at the auto show they indicated they expect foreign carmakers to contribute about one-quarter of the carmakers’ share.

Ms. Merkel also reassured carmakers that her government had no plans to follow in the footsteps of Britain and other countries by announcing a future date after which gas and diesel cars would not be allowed. “There’s no escaping that we will need the combustion engine for decades to come,” she said. She hailed the industry for producing 870,000 jobs in the country.

The diesel scandal, which began two years ago when VW was caught cheating on emissions tests in the United States, has clearly affected the Frankfurt auto show, one of the mainstays of the international industry. German manufacturers sharply reduced their exhibition space and many foreign brands such as Fiat and Jeep decided to make no appearance at all.

“Since the diesel scandal, the industry is being consumed by a permanent fire,” said Volker Bouffier, the prime minister of the German state of Hesse, host of the auto show.

The diesel scandal has become an election pocketbook issue because the value of used diesel cars has fallen in recent months, even with industry offers as much as €10,000 trade-in value on a new, less polluting diesel. The government has demanded that carmakers install software fixes to the polluting cars at no cost to the car owners in an effort to blunt driver anger over the scandal.

Daniel Delhaes is a Berlin-based correspondent for Handelsblatt. Charles Wallace, an editor in New York, adapted this story for Handelsblatt Global. To contact the author: delhaes@handelsblatt.com

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