After Toyota, the three dominant auto manufacturers are Volkswagen (VW), which also owns Porsche and Audi, Daimler (maker of Mercedes Benz), and BMW (your “ultimate driving machine”). This year, these three Bavarian virtuosos face the wrath of Generalbundesanwalt (Public Prosecutor General of Germany).

German prosecutors have fined Mercedes-Benz parent Daimler €870 million over allegations it sold at least 684,000 cars equipped to cheat on diesel related emissions. Although the company continued to object to the penalty, it agreed to pay the penalty. The automaker is expected to take a charge of €1.6 billion ($1.8 billion) to handle litigation related to the diesel related scandals.  

Volkswagen, which was hit with billions of dollars in penalties in the U.S. for an emissions-cheating scheme, was finally fined €1 billion by German prosecutors for failing to properly supervise the employees who devised and deployed illegal software in diesel models to evade pollution controls. Volkswagen is expected to pay roughly $26 billion in the U.S. to settle criminal charges and civil suits related to this scandal. The company has admitted to installing software in 11 million diesel vehicles that caused pollution controls to operate properly only when an engine’s computer determined that the car was undergoing a test. Under actual driving conditions, the vehicles produced much more lung-damaging nitrogen oxides than allowed by law.

BMW announced this year that it is taking a charge exceeding €1 billion in 2019 related to diesel related emissions fraud. In September 2018, EU opened an investigation into suspected collusion between BMW, Volkswagen and Daimler to delay clean-emissions technology in cars and SUVs. The EU commission alleges that the automakers participated in a cartel to limit or delay two types of technology for diesel and gasoline cars. Daimler, which owns Mercedes-Benz, doesn’t expect to incur a fine because it alerted the EU to the problem (whistle blower benefits). VW’s penalty is likely to be lessened because it also cooperated early. Maybe we need some basic economic refresher modules reminding the automakers that collusion between dominant players in any industry is illegal. Or maybe the new mantra is “catch me if you can.”

Are we in Dire Straits, “Are we in trouble now?”

Charlotte, November 2019

mailby feather