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Emission Probe in Europe: German Automakers in Focus
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Almost after a year of conducting raids on German automakers, regulators of European Union have initiated an in-depth probe to determine whether a possible collusion between the top automakers has taken place to delay the development of vehicle emission technologies. Five German automakers facing investigation are Daimler AG , BMW AG (BAMXF - Free Report) and Volkswagen AG as well as its two brands i.e. Audi AG and Porsche AG.
The commission will investigate whether the companies decided not to compete with each other by developing selective catalytic reduction systems to curb pollution from gasoline or diesel-engine passenger cars. The probe focuses on catalytic reduction systems that involve injecting urea solution into exhausts that can remove harmful nitrogen oxides. In 2017, a report by Der Spiegel magazine claimed that automakers decided to limit the size of the tank that holds urea solution.
Scandalous History
This emission probe is certainly not the first of its kind. Earlier, in 2015, German auto industry grappled with a similar scandal. Europe’s largest automaker, Volkswagen was caught using illegal software in diesel engines to cheat on strict U.S. anti-pollution tests. After being proven guilty, Volkswagen paid billions of dollars to settle criminal and civil charges.
After allocating roughly $32 billion to settle lawsuits, Volkswagen still has more than $10 billion claims from annoyed investors and customers. Apart from hurting the company’s bottom line, the scandal badly tarnished its reputation.
Another automaker based in Germany, Daimler faced a similar investigation in Germany and the United States in 2017, which troubled it for months. The inquiry involved two engines used by its Mercedes brand’s diesel cars. Later, Daimler voluntarily recalled more than three million Mercedes-Benz diesel cars in Europe to fix software patches, which was expected to cost roughly €220 million.
Subsequently, in May 2018, road vehicle authority of Germany ordered Daimler to recall units of its Mercedes-Benz Vito delivery van. Per the regulator, the specific engines’ diesel emission control features didn’t fulfill legal requirements. The affected vehicles included Vito models, having 1.6-liter diesel engines of Euro 6 standard.
BMW was also investigated by German prosecutors on the suspicion of manipulating emission control of its diesel vehicles. Per the inquiry, the company didn’t tamper with exhaust gases but accidentally installed wrong software in 7600 vehicles, including the 750xd and M550xd models. In order to settle the issue without a lawsuit, BMW opted to pay a €10 million ($11.7 million) fine.
BMW currently carries a Zacks Rank #3 (Hold), while Volkswagen has a Zacks Rank #4 (Sell) and Daimler has a Zacks Rank #5 (Strong Sell).
Long-term growth rate for BMW, Volkswagen and Daimler are 4.5%, 5.9% and 2.8%, respectively.
Probable Consequences
If the accusation gets confirmed, it will mean that the companies denied consumers the opportunity to buy less polluting cars despite the availability of technology. This will mark another major diesel-trouble for German automakers. Further, examples of past instances signal a rough ride ahead for automakers laid with fines. Per an analyst of Bloomberg Intelligence, the commission will include vehicle sales all over Europe and won’t be limited only to Germany, thus, leading to hefty fines for the companies.
However, per Reuters, automakers involved in the recent probe have stated that an ongoing probe doesn’t necessarily mean that a violation has taken place. Further, all the three major automakers are cooperating for the investigation.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
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Emission Probe in Europe: German Automakers in Focus
Almost after a year of conducting raids on German automakers, regulators of European Union have initiated an in-depth probe to determine whether a possible collusion between the top automakers has taken place to delay the development of vehicle emission technologies. Five German automakers facing investigation are Daimler AG , BMW AG (BAMXF - Free Report) and Volkswagen AG as well as its two brands i.e. Audi AG and Porsche AG.
The commission will investigate whether the companies decided not to compete with each other by developing selective catalytic reduction systems to curb pollution from gasoline or diesel-engine passenger cars. The probe focuses on catalytic reduction systems that involve injecting urea solution into exhausts that can remove harmful nitrogen oxides. In 2017, a report by Der Spiegel magazine claimed that automakers decided to limit the size of the tank that holds urea solution.
Scandalous History
This emission probe is certainly not the first of its kind. Earlier, in 2015, German auto industry grappled with a similar scandal. Europe’s largest automaker, Volkswagen was caught using illegal software in diesel engines to cheat on strict U.S. anti-pollution tests. After being proven guilty, Volkswagen paid billions of dollars to settle criminal and civil charges.
After allocating roughly $32 billion to settle lawsuits, Volkswagen still has more than $10 billion claims from annoyed investors and customers. Apart from hurting the company’s bottom line, the scandal badly tarnished its reputation.
Another automaker based in Germany, Daimler faced a similar investigation in Germany and the United States in 2017, which troubled it for months. The inquiry involved two engines used by its Mercedes brand’s diesel cars. Later, Daimler voluntarily recalled more than three million Mercedes-Benz diesel cars in Europe to fix software patches, which was expected to cost roughly €220 million.
Subsequently, in May 2018, road vehicle authority of Germany ordered Daimler to recall units of its Mercedes-Benz Vito delivery van. Per the regulator, the specific engines’ diesel emission control features didn’t fulfill legal requirements. The affected vehicles included Vito models, having 1.6-liter diesel engines of Euro 6 standard.
BMW was also investigated by German prosecutors on the suspicion of manipulating emission control of its diesel vehicles. Per the inquiry, the company didn’t tamper with exhaust gases but accidentally installed wrong software in 7600 vehicles, including the 750xd and M550xd models. In order to settle the issue without a lawsuit, BMW opted to pay a €10 million ($11.7 million) fine.
BMW currently carries a Zacks Rank #3 (Hold), while Volkswagen has a Zacks Rank #4 (Sell) and Daimler has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term growth rate for BMW, Volkswagen and Daimler are 4.5%, 5.9% and 2.8%, respectively.
Probable Consequences
If the accusation gets confirmed, it will mean that the companies denied consumers the opportunity to buy less polluting cars despite the availability of technology. This will mark another major diesel-trouble for German automakers. Further, examples of past instances signal a rough ride ahead for automakers laid with fines. Per an analyst of Bloomberg Intelligence, the commission will include vehicle sales all over Europe and won’t be limited only to Germany, thus, leading to hefty fines for the companies.
However, per Reuters, automakers involved in the recent probe have stated that an ongoing probe doesn’t necessarily mean that a violation has taken place. Further, all the three major automakers are cooperating for the investigation.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>