German authorities charge carmakers over steel cartel

25 November 2019

Germany’s cartel authority is to fine BMW, Volkswagen (VW) Group and Daimler over unlawful actions related to the purchase of steel.

The three manufacturers will receive fines totalling €100 million for the fixing of prices to prevent competition. The issues related to the purchase of ′long steel’ which is used in the manufacture of items such as crankshafts, connecting rods, camshafts, gear wheels and steering rods.

Carmakers can either purchase these components from forging companies or produce them themselves in their own forges. For this latter purpose, long steel is purchased beforehand as a raw material.

Long game

The Bundeskartellamt said that long steel is usually sold by the steel manufacturers or forging companies based on a certain price model. This consists of a basic ′price and scrap’ and alloy surcharges. During the period of infringement the surcharges, which fluctuated according to the amount, accounted on average for approximately a third of the end price of engineering steel, which is the main type of long steel concerned here. The purchase costs of long steel account for less than 1% of the total costs of a car.

Representatives of the car manufacturers involved ensured one another that they would adopt the changes introduced by the steel manufacturers over surcharging in 2003 and 2004 and continue to adhere to the established practice of uniformly calculated price surcharges. They did so at any rate until January 2016, the authority found.

Agreed culpability

′Between 2004 and the end of 2013 representatives of BMW, Daimler and Volkswagen regularly met twice a year with steel manufacturers, forging companies and large systems suppliers and exchanged information on uniform surcharges for the purchase of long steel products,’ says Andreas Mundt, president of the Bundeskartellamt.

′Scrap and alloy surcharges account for a substantial part of the purchase prices for long steel. Insofar as the surcharges were no longer negotiated individually with the suppliers as a consequence of these talks, price competition between the companies on these price components was eliminated.’

The three carmakers acknowledged the facts as established by the Bundeskartellamt and agreed to a settlement. The authority took this into account when calculating fines, with BMW paying €28 million, and Daimler €23.5 million. VW Group has not commented over the size of its fine, but it is expected to be in the region of €48.5 million, based on the Bundeskartellamt statement.

Investigations into three component suppliers and an industrial association were dropped for ′discretionary reasons’ the authority said.

The findings are not linked to the European Commission’s investigation over the three carmakers and an emissions cartel. This probe began in 2017, following Daimler’s admission to the European Commission that the companies were working together to prevent certain technologies coming to market. The Commission has yet to announce the financial penalties it will impose.