Diesel Summit

Called the Axles of Evil, Carmakers Offer Diesel Compromise

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Greenpeace gave the automobile industry a warm welcome in Berlin. Source: Reuters

German carmakers and government officials on Wednesday agreed on a package of software updates, trade-in bonuses and a public transit fund designed to reduce diesel exhaust pollution, but opponents called the agreement a “debacle” and vowed to press ahead with lawsuits seeking to ban diesel cars in major cities.

A sit-in protest forced the “diesel summit” to move from the Ministry of Transport in Berlin to the more secure Ministry of the Interior, underlining the growing strength of the environmental opposition in Germany. The protesters hoisted a sign reading: “Welcome to Fort NOx,” a reference to nitric oxide, the main chemical pollutant from diesel cars.

The summit, which was attended by politicians and executives from BMW, Daimler, Ford, Opel, and Volkswagen Group, which also includes Audi and Porsche, agreed that the carmakers would be allowed to recall about 5 million diesel cars to be fitted with new pollution-control software. The owners of another 5 million older diesel cars will be given trade-in bonuses of €2,000 to €8,000 ($2,370 to $9,470) by dealers to buy new, less polluting diesel cars.

“Once again the German automotive industry has impressively forced its views on the federal and state governments.”

Jürgen Resc, Managing director, German Environment Aid

The government and the car industry will also establish a €1 billion fund to finance the acquisition of non-polluting electric mass transit and also municipal vehicles such as garbage trucks will be fitted with catalytic converters to reduce exhausts. Carmakers will contribute half of the fund based on their relative diesel market share, bringing their total costs close to €1 billion.

The goal is to cut diesel emissions by 25 percent, precluding a lawsuit now winding its way through the German courts that seeks to impose a driving ban in Stuttgart, corporate home of Daimler and Porsche, where air pollution from diesels is often above the legal limit. The fear is that if the Stuttgart suit succeeds, others cities will institute similar driving bans.

The uproar has caused a collapse in diesel car sales in the country, down by 19 percent in July, according to government statistics. This reflects a major loss of faith in a once beloved technology Germany pioneered. Strikingly, Elon Musk, CEO of the electric car firm Tesla, announced in California that his new Model 3 electric vehicle, which costs only $33,000 and is capable of traveling 300 miles on a single charge, is sold out until the end of 2018.

Jürgen Resch, managing director of the non-governmental organization German Environment Aid, said the proposed solution to the diesel crisis would affect only 20 percent of the country’s 15 million diesel cars and only go into force during summer months, leaving cities heavily polluted in the winter.

“What a debacle for the air pollution policy of the Federal Republic,” Mr. Resch said in a statement. “Once again the German automotive industry has impressively forced its views on the federal and state governments.”

Although Germany has been a leader in environmental matters – Chancellor Angela Merkel ordered the shutdown of all the country’s nuclear power plants – the government is in a quandary because the car industry is the engine of Germany’s export miracle and employs tens of thousands of workers. In addition, a sudden decision to restrict diesels would be counterproductive because the cars produce less carbon dioxide than gasoline vehicles, meaning that the country might still exceed pollution limits.

A proposal to force the carmakers to replace the pollution-control equipment with a better hardware device was rejected by the carmakers on the grounds that the hardware hasn’t yet been perfected.

The car industry has been put on the defensive by a series of scandals that began in 2015 when the U.S. government accused Volkswagen of installing software in its diesels that let VW cars cheat on emissions tests but pollute many times more when on the road. Astonishingly, Porsche — which is part of the VW group — last week confessed that the software was still installed on its SUVs in Germany and offered a voluntary recall to remove it.

Last week, the diesel scandal intensified when the European Union announced that it was investigating possible antitrust behavior by German carmakers for meeting to set prices and agree which technologies to adopt. The spiraling scandal has been a disaster for the entire industry, with Mercedes recalling three million diesel cars for a problem that had long gone unnoticed.

One German tabloid ran a banner headline calling the industry “the Axis of Evil,” word play on former US President George W. Bush’s description of Iran, Iraq and North Korea. The industry once hailed for producing the world’s “ultimate driving machine” is now reviled by a large segment of its own country.


Daniel Delhaes reports on politics, transport and airlines from Handelsblatt’s Berlin office. Charles Wallace is a reporter with Handelsblatt Global in New York City. To contact the authors: delhaes@handelsblatt.com



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