A $22 billion fine could crush Volkswagen's Dieselgate recovery.
Soccer fans around the world can point out one good reason that Germany won the 2014 FIFA World Cup. It has a lot to do with how the team plays. Each player works together towards the greater good, passing the ball frequently and avoiding pursuit of personal glory by being the scoring forward, instead ensuring the team as a whole wins. Unfortunately, Germany’s team mentality has landed Volkswagen, Mercedes, and BMW into hot water and according to Bloomberg, it has the potential to be as bad as Dieselgate.
The three companies are facing allegations that each colluded with the other two to set strategy as well as work on technology and parts in direct violation of American and European antitrust laws. The European Commission and the German cartel office is investigating the matter, but Bloomberg is reporting that the US Justice Department has joined in. The initial reporting was done by Germany’s Der Spiegel magazine, which claimed that BMW AG, Daimler AG, and Volkswagen AG have colluded for decades, starting with a meeting in the 1990s to coordinate activities on everything from costs and suppliers to the emissions control units in diesel engines.
The article cited the three automakers’ attempts to obstruct competition as the reason behind the collusion. The scandal involves each automaker gathering hundreds of employees, around 200 total split into 60 teams, to share technology and set pricing for everything from transmissions to convertible roofs. A guilty conviction would obviously be terrible for all three automakers, but Volkswagen, still in the process of recovering whatever cash it can after having spent $25 billion on Dieselgate, would be hurt the worst. The Financial Times speculates that Volkswagen alone could see up to $22 billion in additional fines by the EU if it suffers the full penalty of the law.
However, that figure could increase if the US levies a fine on the auto giant and its cartel members as well. It’s take some time before guilt or lack thereof is determined, but this could spell hard times ahead for Germany’s big three.