Search

 

Cablegate: Daimler and Porsche: Differing Challenges in Reducing Co2

VZCZCXRO7258
OO RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFT #1515/01 1400537
ZNR UUUUU ZZH
O 190537Z MAY 08
FM AMCONSUL FRANKFURT
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6456
INFO RUCNFRG/FRG COLLECTIVE IMMEDIATE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEHBS/USEU BRUSSELS
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 FRANKFURT 001515

DEPARTMENT FOR EUR/AGS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EIND ENRG PGOV SENV GM
SUBJECT: Daimler and Porsche: Differing Challenges in Reducing CO2
Emissions

REF: A. Munich 0175
B. Berlin 0560
C. Munich 0100

1. SUMMARY: The proposed European Union directive requiring car
manufacturers to lower CO2 emissions significantly by 2012 presents
major challenges to Daimler and Porsche, both German manufacturers
of high-end, high-powered automobiles. Neither firm has expressed
confidence that it will reach the required goal in time, but Porsche
appears to be impossibly far away from reaching it and resigned to
its fate. Both firms will look to the German government to lobby
the EU for more lenient restrictions, while Porsche likely will also
try to acquire a majority stake in Volkswagen, thereby pooling the
fleets and lowering the overall CO2 emissions average. END
SUMMARY.

Daimler: Confident of Meeting Target, But Not in Time
--------------------------------------------- ------

2. Senior Daimler executives told ConGen Econ Officer and Econ
Specialist that their company had long ago realized the importance
of reducing CO2 emissions and increasing energy efficiency to the
auto industry's future. They expected their fleet would have an
average CO2 emission of 136 g/km in 2012, and would not meet the EU
requirement of 130 g/km until 2015. Therefore, the company is
currently lobbying the German government and the EU for a three-year
extension of the phase-in period to 2015, arguing that nearly 90% of
all models to be sold in 2012 can no longer be modified since they
are already in the advanced engineering or production phase.
Daimler has succeeded in lowering its emissions average in recent
years by developing new technology, but is also helped by its
light-weight, more fuel-efficient Mercedes A-class Smart cars.

3. The executives expressed doubt that certain high-powered
automobiles, such as the Mercedes S-class, would ever comply with
the proposed 60% maximum overrun of the average and are therefore
lobbying for an overrun of 80%. They also criticized the current EU
draft, which Daimler believes ignores innovations that have reduced
CO2 emissions, such as energy-efficient lights, solar-paneled glass
roofs and gear shift indicators. Daimler expressed dissatisfaction
with the level of the fines for non-compliance. These will begin in
2012 and reach 95 euros per gram by 2015. According to Daimler's
calculations, the fines are around twenty times greater than those
that apply to energy providers in the CO2 emission trading system.


4. Daimler executives maintained that the German government
understood Daimler's concerns and is an honest broker in making its
case to the EU. They expected less understanding for their plight
in the EU Council, where positions were already fixed, and in the EU
parliament, where many members vote along national lines on the
issue. Should no compromise be achieved, the company expects the
German representation in the EU Parliament to organize a blocking
vote along with the United Kingdom, the Scandinavian countries and
several East European partners, against a tightening of restrictions
to 120 g/km.

Porsche: CO2 Emissions an Existential Threat
--------------------------------------------

5. A senior executive at Porsche called EU CO2 regulations a direct
threat to its very existence. At present, Porsche's fleet has an
average emission of 290 g/km, impossibly far away from the target of
130 g/km. Although Porsche is designing a hybrid car and a
diesel-powered SUV, technology simply does not exist to make its
fleet comply while maintaining the high performance standards that
distinguish Porsche. The executive echoed Daimler's criticism of
the anticipated non-compliance fines, which Porsche would have to
pass on to the consumer and which, in turn, could dramatically
affect sales.

6. Speaking candidly, the executive described the legislation as a
deliberate attack on this segment of the German automotive industry,
supported by France and Italy, whose car industries produce smaller,
more energy-efficient vehicles. Porsche's biggest competitor,
Ferrari, has the advantage of pooling its fleet with Fiat, making
its high-emitting cars statistically insignificant. Porsche hopes
to pursue a similar arrangement by increasing its ownership share in
Volkswagen (VW) from 30.9% to over 50% and pooling the two fleets.


7. Pooling Porsche and VW may prove difficult as the government of
VW's home state of Lower Saxony owns 20.8% of the company, and local
political leaders fear losing control of an economic force in their
region. Moreover, Chancellor Merkel has expressed support for
redrafting a "VW Law" in Germany, which would limit voting rights in
the company to 20%. The EU struck down Germany's "VW Law" only last

FRANKFURT 00001515 002 OF 002


year, saying that it violated free movement of capital. The
executive said Porsche's relationship with the federal chancellery
was not as good as under former Chancellor Gerhard Schroeder, who,
coming from Lower Saxony, had a solid understanding of the German
automobile sector.

Comment
-------

8. Like most car manufacturers in Germany, Daimler and Porsche will
lobby hard to change EU CO2 regulations, which pose severe
challenges for the premium car market. Though both companies would
be hit hard, Daimler is better positioned for eventual compliance
and may even benefit, should Porsche's losses in business translate
to Daimler's gain. Porsche faces the greater crisis, since it has
little hope of bringing its CO2 emissions down far enough and may
face political opposition in its attempt to acquire a majority stake
of Volkswagen to pool its fleet. The challenge for the German
federal government is to lobby for the domestic car industry in the
EU while also balancing the competing interests of the various
German manufacturers. END COMMENT.

9. This cable was coordinated with Embassy Berlin and ConGen
Hamburg.
POWELL

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC