ANALYSIS: Expert says German carmakers cannot afford CO2 cuts

Dec 19, 2007, 16:15 GMT

Stuttgart - Luxury automakers cannot afford to use emissions-cutting technology because their powerful cars would become impossibly expensive, an industry expert warned Wednesday.

The European Union's executive arm, the Commission, put itself on a collision course with the German automobile industry on Wednesday by approving strict limits on average carbon-dioxide (CO2) emissions of cars.

Willi Diez, head of the Automobile Industry Institute in Geislingen, near Stuttgart, Germany, said the EU plans for penalties for excessive emissions were a 'serious defeat for the German makers of premium cars.'

In an interview with Deutsche Presse-Agentur dpa, he forecast that the makers of high-end cars would try to finance the new regime by upping the prices of their cars.

'Given the tough competition, I'd be doubtful if that will succeed,' he said.

The big-name German companies would also attempt to cut production costs to compensate, which would mean a loss of jobs in Germany. Daimler and BMW would partly relocate to key export markets in Asia and the United States.

'Those markets are going to become even more important to them,' he said, forecasting an expansion at US plants or even completely new factory sites there.

Diez conceded it was technically possible to so refine the powerful cars that they fulfilled the EU standards. But the components required for this would be so expensive that end users could not afford them, he said.

He said it made no sense to him that alternative proposals by German manufacturers had not been accepted in Brussels.

The European manufacturers had not been in agreement among themselves. French and Italian makers would 'definitely' have far fewer problems meeting the requirements, he said.

Germany had earlier voiced dismay at the way the EU Commission plans to enforce new CO2 emissions limits, charging that the penalties are biased against its makers of big cars.

Chancellor Angela Merkel said she approved the EU ceiling of 120 grams of carbon dioxide per kilometre for the European vehicle fleet, but the EU rules would discriminate against Germany and its car industry.

'We believe that the road suggested is not favourable in economic terms ... We think it's going to be at the expense of German car producers and thus we are not happy with the result,' she said in Berlin.

Earlier the Commission said it was determined to reduce the average amount of carbon dioxide emitted by all new passenger cars to 120 grams per kilometre by 2012.

A cut to the 130-gram level would be achieved with engine improvement and the other 10 grams would be saved by altering other components. The current average is about 160 grams of carbon dioxide per kilometre for a new car. CO2 is blamed for climate change.

Germany charges that the EU is letting off other nations' makers, while unfairly fining German makers of bigger, more powerful cars, which necessarily use more fuel and have more emissions.

But a German environmentalist motoring club, Verkehrsclub Deutschland (VCD), attacked the EU plans as insufficient to reduce emissions.

Disagreeing with the manufacturers, it charged that the EU had weakened the cuts and allowed itself to be manipulated by the car industry.