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German court rules in favor of diesel ban in Mercedes’ hometown as fallout over VW scandal continues

Bloomberg

German carmakers, fighting for a future for diesel technology in Europe, faced a setback after a Stuttgart court ruled in favor of a complaint seeking to ban all diesel cars from entering the home city of Mercedes-Benz and Porsche.

Diesel driving bans would be an adequate solution to cleaning up Stuttgart’s air, while simply upgrading diesels is ineffective, said Judge Wolfgang Kern of Stuttgart’s administrative court, ruling on a case brought by an environmental group over the city’s failure to comply with emissions levels for smog-inducing nitrogen oxide. Kern’s decision, which can be appealed, is likely influence a number of other judicial decisions coming in Germany on the matter.

Automakers, the federal government and some German states are seeking to avoid such bans by instead pursuing recalls to improve emissions as the diesel-cheating scandal that erupted two years ago at Volkswagen AG continues to engulf the industry. On Thursday, German Transport Minister Alexander Dobrindt took a hard-line stance against Porsche, accusing the sports-car maker of using a defeat device in the Cayenne and forcing the VW unit to recall thousands of the sport utility vehicle.

While German automakers argue that they need to continue using diesel as an interim step before moving more fully to electric cars, the confidence crisis facing the technology has ballooned in the past two weeks.

Daimler AG’s Mercedes-Benz on July 18 announced plans to voluntarily recall 3 million diesel vehicles in Europe to upgrade their technology, while VW’s Audi brand said three days later it will service 850,000 cars. On Thursday, VW said it would expand a recall to about 4 million cars to upgrade the engine software.

The national debate on diesel, which last year made up 46 percent of car sales, has unsettled consumers, and sales of models using diesel technology have been dropping. Adding to the overall discontent, VW and Daimler are also caught up in another scandal with BMW AG over allegations they colluded on technology for decades. BMW vehemently denies cheating on diesel systems.

Possible driving bans in some German municipalities clash with an industry that employs tens of thousands to produce vehicles that use diesel technology. While states appear willing to strike deals that allow carmakers to upgrade older models, city governments and courts are likely to continue pushing back. In Munich, a court compelled the city in March to prepare diesel prohibitions to bring down levels of nitrogen oxide.

Chancellor Angela Merkel’s government, which has thus far eschewed following the lead of the U.K. and France in setting out timetables for ending the use of combustion engines in cars, is also under pressure to show it’s taking action. Dobrindt has called an emergency summit for next Wednesday in Berlin of industry executives and government officials to discuss their options.

With a federal election just two months away, two ministers in Merkel’s government from the Social Democrats, her junior coalition partner, have urged Dobrindt this week to take a harder stance against the industry. Environment Minister Barbara Hendricks said on Thursday that the government has too cozy of a relationship with automakers, while Economy Minister Brigitte Zypries on Friday said the sector’s reputation is at stake.

“Car manufacturers must restore lost consumer confidence and contribute to improving air quality,” Zypries told German newspaper Rheinische Post. Dobrindt “has to make this clear on behalf of the federal government and have carmakers take responsibility.”

Dobrindt on Thursday announced a mandatory recall for Cayennes with 3-liter diesel engines. Porsche said it was taking “full responsibility” and cooperating closely with authorities. The transport minister also warned that there may be more to come, saying there’s a “high probability” that VW’s Touareg SUV using a 3-liter diesel engine has similar software installed.

The Porsche recall affects cars with 3-liter TDI V6 diesel engines, which were developed by sister brand Audi. The motors were at the center of Audi’s own emission woes in the U.S. Porsche’s works council head Uwe Hueck in a recent media interview lashed out at Audi’s management over supplying a rigged engine and called for the marque’s top executives to be suspended.

Porsche’s Cayenne is one of the carmaker’s most popular models. While the company is best-known for its 911 sports car, bigger four-door vehicles like the Cayenne or the smaller Macan, as well as the Panamera sedan, have become critical parts of its line-up.

While Porsche said that it had pro-actively informed authorities of engine irregularities and vowed to bear “full responsibility toward the customer,” Dobrindt said that “there is no explanation for why this software is in these vehicles.”