Emissions cheating Dieselgate catches up to troubled Opel

Prosecutors raided the French-owned carmaker looking for evidence of emissions fraud, threatening massive recalls and thwarting Opel's comeback attempt.
Lightning strikes again.

Dieselgate has finally caught up with Opel, the laggard in the German car industry, as authorities raided the headquarters and another factory, looking for evidence of diesel emission fraud. The subsidiary of France’s PSA, which makes Peugeot and Citroen cars, is now officially part of the emissions-cheating scandal that has engulfed other German automakers.

The probe concerns Opel’s Insignia, Zafira and Cascada diesel models. It could lead to a mandatory recall of some 100,000 vehicles across Europe.

Opel, owned by General Motors until last year, for its part denies use of the illegal defeat devices that reduce nitrogen dioxide emissions during testing but turn off during road use, leading to emissions levels well above those advertised.

It's yet another stumbling block in Opel’s attempted comeback. Although it registered an operating profit for the first half of this year, Opel has been losing market share and is looking to cut some 20 percent of the workforce. Its losses under GM ownership have totaled about $19 billion since 1999.

The emissions fraud first discovered in Volkswagen and Audi models in 2015 has affected other carmakers and resulted in recalls, retrofitting of software and hardware, and billions of dollars in fines. It has also led to the threat of diesel driving bans in German cities. Daimler is recalling almost 1 million Mercedes vehicles in Europe, although the luxury carmaker says its cars comply with regulations.

Opel dragging its feet on software fixes

Automakers have justified use of the defeat devices to protect engines in periods of extreme cold or heat, shutting down controls to permit higher emissions. Authorities are skeptical of this explanation.

Monday’s raid was not Opel’s first brush with authorities. Germany's Federal Motor Transport Authority, KBA, launched an administrative procedure against the automaker in 2016 after finding emissions devices they suspected of being illegal. They ordered Opel to install a software fix, but authorities say Opel has been dragging its feet on carrying it out.

Only 70 percent of the mandated fixes have been implemented, and officials’ patience is wearing out. The KBA lodged a criminal complaint against Opel in April. The recall is virtually certain to go ahead, a KBA spokesman in Berlin confirmed to Handelsblatt. The new investigation currently targets unknown persons for criminal activity, prosecutors said.

The Dieselgate issues come as new owner PSA is trying to revamp and downsize Opel to recover from years of losses as Germany’s also-ran carmaker. The company was founded in 1862 to manufacture sewing machines and later started building bicycles. It began making cars in 1899 and became a subsidiary of General Motors in 1929, remaining a GM unit until last year.

Company founder Adam Opel, who died in 1895, did not believe at the time cars had a bright future. "This stinking device will never become anything more than a plaything for millionaires, who don't know how to waste their money," he allegedly said.

Franz Hubik covers the auto industry and its relationship to government policy. Darrell Delamaide adapted this story into English for Handelsblatt Global. To contact the author: [email protected].