Experts discount German outcry at CO2 cuts

23 December 2007

Frankfurt (dpa) – Germany’s premium carmakers worked themselves into a rage over coming EU limits on carbon-dioxide emissions, suggesting they face punitive fines and must slash jobs.

But many experts disagree, saying the 748,000 Germans working in the automotive industry can rest easy.

Even some industry executives admit there is a good deal of exaggeration in claims that sales of luxury Mercedes, BMW and Audi cars with powerful engines and lots of heavy accessories are due to collapse.

To force change, the European Union plans penalties for gas guzzlers that surpass strict limits on emissions. The industry will have four years till 2012 to alter its practices.

Emissions from the engines themselves must be cut from an average 160 grams of carbon dioxide per kilometre to 130 grams. Engineers say no new inventions are needed to do this.

Ferdinand Dudenhoeffer, chief of the automotive technology consultancy CAR, said, "The technology is there for the taking."

It had not been used yet because the current cost of installing it was greater than the savings in fuel costs for motorists.

The EU rules would give motorists the "right price signal," he said.

"The regime doesn’t mean the end of the German car industry," said Klaus Franz, who heads the labour representation council at Opel, the German unit of General Motors. It would prompt carmakers to try new ideas.

"Innovation has never wiped out jobs," he said.

The premium makers suggest they are going to have to pay massive penalties to the EU to stay in business, with the fines to be phased in from 2012 to 2015.

But commentators doubt if car companies will just resign themselves to handing over millions to Brussels.

Ulrich Hoepfner, chief executive of the IFEU institute for energy and environmental research, said, "I don’t expect fines in any sector apart from luxury cars, and the penalty will rarely exceed 500 euros (720 dollars) per car.

"And the manufacturers have lots of ways of avoiding penalties."

The penalties will not be calculated per car but per manufacturer. So each auto group could offset its gas guzzlers with small economy cars with minimal emissions.

"If they see an overrun coming in November, they’ll start making special offers of their small cars to even up the balance," Hoepfner predicted.

Alliances were also possible: Porsche, with its powerful sports cars, Cayenne SUV and planned Panamera four-door luxury car, could join its fleet to thrifty little Volkswagens. Porsche owns one third of VW.

The German makers alleged this week a bias by the EU, with volume makers in other European nations coming off better under the rules, especially since German domestic car sales have been weak.

The German car industry federation VDA says this year’s sales of 3.16 million new cars will be the worst since Germany re-unified in 1990. It blames a hike this year in sales tax and shopper uncertainty over planned emissions taxes.

But critics say German automakers are habitually conservative, ignoring trends such as the introduction of particulate filters for diesels or consumption-cutting hybrid drives. They suggest Germany Inc. should wake up.

Environmentalists say the EU Commission would never have needed to act this way if the European carmakers had performed on their past promises to reduce emissions.

Ultimately, emissions reduction will be decided by customers who will have to pay a higher premium for a powerful car. Some estimate it would take up to 3,000 euros per luxury car to cut its CO2 creation.

Solutions include a switch to less dense materials to reduce weight, for example aluminium in place of steel, and redesigning car bodies so that the skin rather than struts carries the load.

"That means manufacturers replacing part of their assembly lines," explained Christoph Stuermer, an economist at Global Insight. "Since they don’t want to do that, they come up with reasons to avoid innovation.

"Yet new ideas would actually make them stronger," he said, suggesting that customers may well benefit too.

"A lighter car uses less fuel, so the customer has lower running costs," he said. "The money saved this way will simply be spent in advance when buying the car."

But Stuermer said he would, however, have preferred the EU to offer cash incentives to the makers to cut kerb weight and migrate away from fossil fuels to "regenerative" energy sources, rather than simply instituting penalties.