VW rivals risk bigger blow as emissions scandal hits diesel

Fri Oct 2, 2015 1:19pm EDT
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By Gilles Guillaume, Barbara Lewis and Laurence Frost

PARIS/BRUSSELS (Reuters) - Volkswagen's cheating on emissions tests has soured the European car industry's heavy bet on diesel, with Renault, Peugeot and Fiat Chrysler potentially facing bigger long-term setbacks than the company that sparked the crisis.

In the face of that perceived injustice, tensions are mounting behind the united facade that European manufacturers present to regulators, some of their representatives say.

VW's use of a banned "defeat device" has drawn scrutiny of more widely practiced test manipulation which, although legal, has allowed real-world nitrogen oxide (NOx) emissions to surge to more than seven times their European limits.

A renewed push to close EU test loopholes promises to add billions of euros to diesel engine costs already at the limit of mass-market viability, hitting small-car brands hardest while shifting demand to hybrids, where the Europeans are several years behind Japanese competitors.

"This VW tidal wave will accelerate the shift," said a senior executive at a French supplier of diesel emissions technology. "Some carmakers aren't ready for this."

In the near term, VW will continue to suffer the worst repercussions of its test-rigging, exposed by U.S. authorities on Sept. 18. The carmaker may raise new capital, a company source told Reuters on Thursday, if the costs of recalling millions of vehicles, fines and lawsuits far exceed the 6.5 billion euros ($7.3 billion) it has set aside.

But when the diesel soot eventually settles, smaller victims may turn out to be more critically injured.

The blackening of diesel, whose superior fuel-economy has been crucial to meeting ever-tougher carbon emissions rules, may force carmakers to spend billions fixing their NOx problem, and billions more to bring forward rechargeable hybrids.   Continued...

The logos of German carmaker Volkswagen is seen at a VW dealership in the Queens borough of New York, September 21, 2015. REUTERS/Shannon Stapleton