Emissions Scandal

Fighting Dieselgate, Bosch Takes Offensive

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Bosch, a German parts maker, made the software that VW manipulated to cheat on emissions tests. Both companies are fighting to defend the integrity of cleaner-burning diesel technology.
  • Why it matters

    Why it matters

    As the world’s leading developer of diesel technology, Bosch is strongly defending the engine, which has been tarred by VW’s Dieselgate scandal.

  • Facts

    Facts

    • Bosch CEO Volkmar Denner on Tuesday demanded “independent testing” of mass-produced cars “like with doping controls in sports.”
    • On Wednesday, the European Union proposed stricter emissions testing and new powers over national regulators.
    • Bosch’s 2015 sales of more than €70 billion, released Wednesday, puts it among the 10 largest industrial companies in Germany.
  • Audio

    Audio

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The chief executive of German auto parts maker Bosch, the world’s leading diesel-technology developer, insists diesel cars are good for the environment.

Volkmar Denner said Tuesday that diesel vehicles are “air-purifying machines” because fewer particulates are released from exhaust pipes than are sucked in by their engines from the air.

He added that European and German emissions reductions targets for 2020 and 2025 can only be reached with a large contribution by diesel, since emissions-free electric vehicles are too costly and will remain out of reach for most buyers.

German investigators are looking into whether Bosch is culpable in the emissions-rigging scandal. The Stuttgart-based company supplied emissions-control software and hardware for VW diesel engines at the heart of the scandal.

Mr. Denner denied that Bosch was responsible for wrongdoing in an interview with Handelsblatt at the recent International Consumer Electronics Show in Las Vegas. In the interview, he strongly criticized the use of the term “Dieselgate.”

Bosch insists Volkswagen, not the parts supplier, is responsible for system integration and the decision to use Bosch’  technology to evade emissions control tests. VW programmed up to 11 million diesel autos to turn on full emissions controls only when they were being tested. Once tests were over, the software switched off the emissions controls, which permitted better performance.

In car assembly, system integration includes additional components such as catalytic converters, which Bosch does not manufacture.

“We are pleading additionally for ongoing controls of mass-produced vehicles by independent testing agencies, like with doping controls in sports.”

Volkmar Denner, Bosch Chief Executive

But some are not convinced that Bosch is as innocent as it claims.

The U.S. Justice Department earlier this month filed a civil lawsuit against Bosch. Several class action lawsuits in the U.S. have also been filed. German federal prosecutors in Stuttgart are also exploring Bosch’s role.

Mr. Denner said Bosch is cooperating fully with agency probes. He said Bosch has conducted its own internal investigation since the scandal came to light last September but declined to discuss the results ahead of official agency disclosures.

Bosch has not set aside provisions to cover the cost of claims, according to Chief Financial Officer Stefan Asenkerschbaumer. He said that would only be necessary once damages were quantifiable and once the likelihood that Bosch had to pay them was over 50 percent.

Commenting on the eve of the European Union’s call on Wednesday for stricter emissions testing and new powers over national automotive regulators, Mr. Denner also called for stronger measures.

“We are pleading additionally for ongoing controls of mass-produced vehicles by independent testing agencies, like with doping controls in sports,” said the Bosch chief. “It can happen at any time.”

Similarly, the European Union wants to introduce spontaneous, independent emissions testing and wants the ability to order recalls and impose penalties of up to €30,000, or $32,611, per vehicle when emissions-rigging software is discovered.

The German Association of the Automotive Industry, known by its German acronym VDA, is also open to the proposal’s overhaul of the E.U.’s so-called “type approval framework.” Under the current rules, only national automotive authorities are responsible for certifying that vehicles are in compliance with E.U. law.

A VDA spokeswoman said manufacturers would comply an expansion of the type approval framework and suggested an industry-wide fund to help avoid conflicts of interest.

The E.U. Parliament and E.U. member states must approve the proposal.

German Transport Minister Alexander Dobrindt said he also supported new tests.

“We need equal implementation of optimized type approval rules in Europe – and the implementation of real driving emissions tests on the street,” Mr. Dobrindt told Handelsblatt.

Mr. Dobrindt also suggested a rotation of technical testing services among manufacturers, disclosure about installed software systems at certification agencies and government test stands for additional controls.

But the VDA cautioned against such disclosure of software, citing concerns over the handling of data, but supported an E.U.-wide certification system.

Stephan Kühn, a transportation expert with the German Green Party, however, was critical of an E.U.-wide type approval framework. Such a system could lead to “certification tourism” in Europe, he said.

Against the backdrop of lawsuits, probes and calls for improved emissions testing, Bosch’s CEO said it was time to launch “a pro-diesel discussion.”

Even as Mr. Denner wished “more support” for such a discussion, Bosch’s financial results showed no lack of it.

The company’s latest financial report, issued on Wednesday, does not indicate the company is suffering from any downturn in demand for diesel components. Bosch’s “mobility solutions” division raised its sales 12 percent in 2015 to €42 billion. That exceeded industry-wide sales growth last year of 2.5 percent.

Preliminary group sales for 2015 – which include Bosch’s consumer goods, energy and building technology and industrial technology divisions – jumped to more than €70 billion in 2015 from €49 billion in 2014. About €16 billion of that came from acquisitions. Organic growth was approximately 10 percent.

The sales result put Bosch into Germany’s top 10 industrial companies.

Adjusted for extraordinary effects, earnings before taxes increased to around €4.5 billion euros, with a profit margin of 6.5 percent.

 

Martin-Werner Buchenau reports from Stuttgart as Handelsblatt’s Baden-Württemberg correspondent. Daniel Delhaes reports on politics, transport and airlines from Handelsblatt’s Berlin bureau.  Thomas Ludwig is a correspondent in Brussels for Handelsblatt. To contact the authors: buchenau@handelsblatt.comdelhaes@handelsblatt.comLudwig@handelsblatt.com

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