Fines for fraud threaten all German manufacturers
German car manufacturer Porsche will pay a 535 million euro fine and BMW is putting more than 1 billion euro aside for possible future fines. Almost all German manufacturers are under pressure of the German justice for cases of possible fraud.
The court in Stuttgart (central Germany) declared on Tuesday that investigating officers observed a violation of the control duty in a development department at Porsche since 2009. A direct result was that Porsche’s V6 and V8 diesel engines were not compliant with emission rules.
We’re talking about a 100.000 cars. The fine is considered paying back the benefits achieved by selling these vehicles. Some of Porsche’s high-level managers have spent a period in jail under temporary custody.
Porsche board members talked about an important step for the company to get rid of so-called dieselgate and its consequences. Porsche isn’t offering diesel engines anymore.
The company still has problems with some cars to meet the new WLTP emission regulations. For that reason, Porsche until now delivered 12% fewer cars to its clients than the year before.
Volkswagen itself and Audi, another VW Group daughter, already saw themselves confronted with fines of 1 billion and 800 million euro respectively. Former VW Group boss, Winterkorn, was recently summoned to appear before court in these matters.
Until now the VW Group already paid more than 30 billion dollars in costs due to dieselgate and its consequences. And it’s not over yet: lawsuits of shareholders and class actions of clients are still pending.
Formation of cartel between BMW, Daimler and VW
Meanwhile, the VW Group, BMW and Daimler are suspected of violating anti-trust laws. The car manufacturers have apparently made agreements of not competing on emission-reducing technologies.
BMW announced that it will fight the allegations with all jurisdictional means at its disposal. Nevertheless, it has put 1,4 billion dollars aside as a provision for possible future fines. As a result, the operational result (EBIT) went into the red (-310 million euro).
In the first quarter of the year, the operating margin was -1,6%, against +9,7% in 2018. Even if you don’t take the provision into account, it still fell back to 5,6%. BMW is blaming investments in electrification and other costs for the result.
Clear regress in 2019
For 2019 the manufacturer foresees a “clear regress” (at least 10%) of its benefit before taxes, already receding 8,1% last year. The operational margin should land between 4,5 and 6,5% for the whole of 2019.
BMW already declared in March that it wants to score 12 billion euro in cost savings. The escalation of tensions between China and the US are also bad news for German car companies. If China ups import taxes from the US to 40%, this would cost BMW 600 million euro. BMW and Daimler are among the biggest importers of cars from the US to China.