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VW, Daimler Should Incur Smaller EU Penalties than BMW.

VW, Daimler Should Incur Smaller EU Penalties than BMW.

Environmentalists Want More Effective Action.

BMW may take a 1 billion euro ($1.2 billion) hit to its bottom line if EU charges stick that it colluded to delay technology for cleaner auto emissions, but VW and Daimler are likely to get off much more lightly, while environmentalists are angry that cash penalties are ineffective.

The Brussels-based Transport and Environment (T&E) lobby group said company directors must be jailed or banned from running businesses to finally stop this activity.

The EU opened an investigation last September into suspected collusion between BMW, Volkswagen and Daimler to delay clean-emissions technology in cars and SUVs. The EU commission alleged the automakers participated in a cartel to limit or delay two types of technology for diesel and gasoline cars.

Daimler doesn’t expect to incur a fine because it alerted the EU to the problem. VW’s penalty is likely to be lessened because it also cooperated early. This leaves only BMW facing a big fine.

The manufacturers have 10 weeks to respond to the charges, and in theory could be fined up to 10% of global revenues

“BMW has announced it is taking a greater than 1 billion euro provision in the 1st quarter. Reflecting this, management is lowering 2019 profit guidance by 1 to 1.5 (percentage points) from 6.8%. We had already expected 1Q auto EBIT (earnings before interest and tax) margins to be below 6% but reflecting the provision we believe it is possible BMW could be loss making,” Citi Research analyst Raghav Gupta-Chaudhary said.   

According to investment researcher said Evercore ISI Daimler is likely to avoid a fine altogether.

“Daimler is likely to seek full whistle-blowing status given that it reported the case first in 2014, and VW is likely to follow suit having provided details in 2016. Under EU law, the first whistleblower is likely to have the fine rescinded, and the second by 50%,” Evercore ISI analyst Arndt Ellinghorst said.

No illegal collusion
“BMW continues to claim that there was no illegal collusion and appeal against any potential penalties. While this is clearly a significant financial burden for BMW, we are pretty sure the market will look through it and treat it as a one-time item as we have seen in similar cases in the past,” Ellinghorst said.

The EU Commission said the alleged collusion occurred between 2006 and 2014.

“Daimler, VW and BMW may have broken EU competition rules. As a result, European consumers may have been denied the opportunity to buy cars with the best available technology,” European Commissioner Margrethe Vestagere said in a statement.

Greg Archer of T&E said more vigorous action is required to stop auto companies colluding like this.

“Carmakers, truck-makers and suppliers have been repeatedly fined for collusion. It’s simply no deterrent. Once again profits are prioritized over people’s lives. The responsible directors must be prosecuted and if found guilty jailed and banned from running any business. Only then will others ensure they operate within the law,” Archer said.


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