Germany Prepares for Next Round of Efforts to Prop Up Diesel

(Bloomberg) -- Germany is preparing to take another run at shoring up diesel as it seeks to balance efforts to improve urban air quality with concerns about lost jobs from the technology’s decline.

Transport Minister Andreas Scheuer signaled automakers including Volkswagen AG and BMW AG could be hit with more painful measures to reduce smog-causing emissions, while pledging to protect “hundreds of thousands of jobs” in the car industry. Stephan Weil, the head of Volkswagen’s home state of Lower Saxony, called for a 1 billion-euro ($1.23 billion) fund to help cities upgrade diesel vehicles.

“In the end, it’s about concrete measures,” Weil, who is also a member of Volkswagen’s supervisory board, said Tuesday at the Future Mobility Summit in Berlin. “If one tells the municipalities that they get the money without any contributions of their own, that would be good.”

Diesel has been a hot topic in Germany ever since Volkswagen admitted to cheating on emissions tests in September 2015. Chancellor Angela Merkel’s government is under pressure to lower urban pollution to avoid driving bans, which could threaten jobs in Germany’s most important sector, which employs more than 800,000 people directly.

‘Maintaining Strength’

“We are also interested in keeping the hundreds of thousands of jobs in a major, highly innovative industry in focus,” Scheuer, a member of Merkel’s Christian Democrat-led bloc, said in an interview with television broadcaster ZDF on Tuesday. “It’s about maintaining that strength.”

Measures to ease diesel pollution could be financed by the country’s automakers. Der Spiegel magazine reported last week that manufacturers including Volkswagen, BMW and Daimler AG could be asked to contribute to a 5 billion-euro government fund to pay for hardware upgrades to lower the emissions of smog-causing nitrogen oxides in older diesel cars.

Scheuer didn’t confirm the plans, saying “the discussion is completely open,” but added that diesel owners should not have to “pick up the tab” for the auto industry’s “mistakes.”

Accelerating Shift

The fallout from VW’s diesel scandal has complicated automakers’ plans, adding pressure to increase investment in electric cars. Consumers turning away from diesel, to-date mostly in favor of gasoline cars, is also making it harder for manufacturers to comply with tightening European Union regulation amid uncertain uptake of battery and plug-in hybrid vehicles.

Having to install new hardware in older diesel models would dilute a victory for the car industry, which agreed in August to provide quick-and-cheap software upgrades and offer trade-in incentives on older diesel models. Diesel’s fortunes took another turn for the worse in February, when Germany’s top administrative judges put millions of diesel cars at risk of being barred from city centers in a ruling that said towns can be forced to implement bans if they are the last resort to reduce smog.

Scheuer, who is due to discuss the diesel issue with cabinet colleagues at a meeting outside Berlin starting on Tuesday, said carmakers must fulfill their pledge to update software on 5.3 million diesel vehicles by the end of this year. He said that a joint government-industry fund worth 250 million euros has already been agreed on and that manufacturers will formally sign up to it on Tuesday.

To contact the reporters on this story: Iain Rogers in Berlin at irogers11@bloomberg.net, Birgit Jennen in Berlin at bjennen1@bloomberg.net.

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Chris Reiter, Elisabeth Behrmann

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