BMW stock drops on charge for possible EU emissions-cartel fine

PARIS • BMW AG shares fell after the luxury carmaker warned of a charge that may exceed €1 billion (RM4.61 billion) stemming from a European Union (EU) probe into alleged collusion by German automakers to delay the rollout of cleaner-emission cars.

The stock dropped as much as 2% yesterday, the most in two weeks, after the Munich-based manufacturer said the provision would weigh on first-quarter results and reduce its automotive profit margin this year to as low as 4.5%.

Daimler AG and Volkswagen AG (VW) shares also slumped — though less than their rival — and VW recovered later.

The EU announced in September it had opened a probe into BMW, VW and Daimler over suspected collusion that could have delayed clean-emissions technology for cars.

The commission, which sent the manufacturers a statement of objections last Friday, laid out allegations that the automakers participated in a cartel to limit or delay two types of technology for diesel and petrol cars. Companies can contest the charges before the EU makes a final decision, which usually brings heavy fines.

“European consumers may have been denied the opportunity to buy cars with the best available technology,” EU competition commissioner Margrethe Vestager said. While companies can cooperate to develop better cars, EU rules “do not allow them to collude on exactly the opposite — not to improve their products”.

In flagging the probability of a significant fine, BMW said it’s contesting the allegations “with all legal means”.

The carmaker’s earnings before interest and taxes margin maybe as much as a 1.5 percentage point lower than its target of at least 6% this year.

VW said last Friday it will review the EU’s objections and respond as part of its cooperation with authorities. Daimler said it doesn’t expect a fine because it was the first to tell the EU about the cartel.

A maximum fine may be “in the area of high triple-digit millions”, Evercore ISI analysts wrote in a research note last Friday. “BMW could be hit particularly hard.”

The probe represents another challenge for the German auto industry, which is still grappling with the fallout from revelations in 2015 of VW’s diesel-emissions test cheating and is facing the disruptive shift to self-driving, electric cars.

Allegations of a cartel emerged in Germany’s Spiegel magazine, which reported that VW, Daimler and BMW met starting in the 1990s to coordinate activities related to vehicle technology, costs, suppliers and strategy, as well as diesel-emissions controls.

VW has put aside some €29 billion to settle diesel emissions-related lawsuits and pay damages, and faces more than US$10 billion (RM41 billion) in further claims from disgruntled investors and customers — as well as untold damage to its reputation as top executives risk being hauled before court.

At the same time, Stuttgart-based Daimler has agreed to recall some 774,000 vehicles in Europe to improve emissions performance and remains subject to investigations in Germany and the US.

BMW has agreed to pay an €8.5 million fine after an investigation found the company had installed the wrong emissions software in a limited number of vehicles by accident. — Bloomberg