European carmakers clash on emissions

A row has broken out over carbon dioxide regulation between Germany’s profitable premium carmakers and their cash-strapped French and Italian competitors.

The dispute centres on the complex but financially critical formula used by the European Commission to assign long-term CO2-cutting targets to individual manufacturers.

The EU’s current regulation, set in 2008, calls on manufacturers to cut cars’ average CO2 grams per kilometer to 130 by 2015, a target most carmakers endorse and say they can meet.

At the time, after heated discussions, carmakers agreed on a “burden sharing” formula that takes into account the weight of cars. Companies that made bigger vehicles – led by the German brands BMW, Daimler’s Mercedes-Benz, and Volkswagen’s Audi – had to cut more of their fleet’s CO2.

However, the Germans are now in disagreement with PSA Peugeot Citroën, Renault, Fiat and General Motors-owned Opel over how the carbon-cutting burden will be apportioned for 2020, by which time the industry will be called on to invest billions of euros to cut their cars’ average CO2 emissions to 95 g/km.

German carmakers want the same “target curve” applied to their vehicles’ CO2 target in 2020 as agreed four years ago, and are pressing their case in Brussels through the powerful VDA industry association.

“The target curve already puts distinctly disproportionate higher demands on manufacturers of premium vehicles,” the VDA said in a recent submission to the Commission, seen by the Financial Times. “The requirements for vehicles such as the Audi A8, BMW 7-Series or Mercedes S-Class cannot be met even by the most efficient vehicles in this category.”

However, Europe’s mass-market carmakers, whose research budgets have been squeezed by the slowdown, say that maintaining the current grading as the overall target falls to 95 g/km would saddle them with unacceptably high costs. Over time, claims one executive, small cars would “have to absorb CO2 from the atmosphere” simply to meet the target.

The dispute came to a head at a mid-June meeting in Madrid of Acea, the European carmakers’ association through which the industry seeks to present a united front on policies such as CO2 regulation.

“People are getting tired with this constant German finger-wagging,” said one official at a mass-market carmaker. “It’s a huge industry and we’re all in it together within Acea membership, we are all feeling a little like the Greeks.”

The proposal is in consultation within the European Commission’s different departments, and a decision could be reached as soon as this week.

Europe’s car industry is already divided over the issue of excess plant capacity, which primarily affects mass-market carmakers such as Peugeot, Fiat and Opel.

VW, Daimler and BMW recently vetoed a proposal by Sergio Marchionne, Fiat’s chief executive and Acea’s current president, that Brussels take a leading role in helping manufacturers restructure their operations.

Source: FT


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