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July 24, 2017


A tsunami about to hit Germany

The car industry is critical to the German economy, which is why we take an interest in the latest story about German motor manufacturers’ criminal behaviour. Spiegel magazine has an absolutely shocking account of a cartel between the five motor companies - VW, Daimler, BMM, Porsche, and Audi. The original article is worse than any summary we have read because of the many details the two authors have dug up in a large investigation. Coming on top of the diesel emissions scandal, the reputation of the German car industry has been reduced to that of a criminal organisation. Unlike the authors, we are less worried about the fines, which will be large, than about the long-term commercial impact.

This is one of the largest cartel cases in German history. The meetings started in the 1990s. The car makers created 60 working groups, each specialising on a different part of the car. For example, they agreed on the maximum speed at which a sunroof opens or closes while the car is in motion, or the maximum size of the tank for the AdBlue chemical which reduces certain toxic emissions. There were working groups for break systems, for seats, for suspension, for clutches, and naturally also for diesel and petrol engines. 

The working groups met several times a year in the cities where the car companies have their HQ’s, like Munich, Stuttgart, or  Wolfsburg; as well as during the large European motor shows in Frankfurt, Geneva, and Paris. They also held teleconferences in between meetings. They were quite cocky. An Audi email reads:

"Hallo everybody, please find attached the date for the 'secret' meeting in Munich."

The authors, two of Germany’s most renowned business journalists, said the co-operation has gone so far that these companies can no longer be regarded as in competition with one another, but as a single Deut­sche Au­to­mo­bil AG

All the companies, except BMW, have admitted the meetings when questioned by the EU Commission and the Federal Cartel Office.

Our other stories

We also have stories on the impact of bail-in-able debt; on the fall of Macron’s popularity; on Orban’s support for Poland’s judicial reforms; on why there will be no exit from Brexit; on why Germany is not profiting from its current account surplus; on whether Greece will go back to the markets now; and on why Tsipras changed his mind after the 2015 referendum.

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Happy Easter

The Thursday briefing will be our last ordinary briefing before the Easter break. We will be publishing a special briefing with our thoughts on the French elections on Saturday. There will be no weekly review this Saturday. The next Daily Briefing will be on Wednesday, April 19.

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