BMW Stock Drops on Charge for Possible EU Emissions-Cartel Fine

BMW AG shares fell after the luxury carmaker warned of a charge that may exceed 1 billion euros ($1.1 billion) stemming from a European Union probe into alleged collusion by German automakers to delay the rollout of cleaner-emission cars.

The stock dropped as much as 2 percent Monday, the most in two weeks, after the Munich-based manufacturer said that the provision would weigh on first-quarter results and reduce its automotive profit margin this year to as low as 4.5 percent. Daimler AG and Volkswagen AG shares also slumped, though less than their rival, and VW recovered later.

The EU announced in September it had opened a probe into BMW, Volkswagen and Daimler AG over suspected collusion that could have delayed clean-emissions technology for cars. The commission, which sent the manufacturers a statement of objections Friday, laid out allegations that the automakers participated in a cartel to limit or delay two types of technology for diesel and gasoline 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.”

Hardest Hit

In flagging the probability of a significant fine, BMW said it’s contesting the allegations “with all legal means.” The carmaker’s Ebit margin may be as much as 1.5 percentage point lower than its target of at least 6 percent this year.

A maximum fine may be “in the area of high triple-digit millions,” Evercore ISI analysts wrote in a research note 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 euros to settle diesel emissions-related lawsuits and pay damages, and faces more than $10 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 U.S.

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

Bloomberg | April 8, 2019