French government reassures Renault investors there is 'no emissions fraud'.

French ministers have said that no “defeat device” or fraudulent software in Renault engines has been found, after the carmaker’s share price plunged on Thursday following reports that police had raided its premises.

Shares in Renault tumbled more than 20% on Thursday morning as investors feared that the French manufacturer could be drawn into the VW diesel emissions scandal, after unions revealed that fraud investigators had searched three sites the previous week. Shares rallied to leave Renault down around 10% by the end of the day.

Renault confirmed the raids had taken place but denied that any evidence of defeat devices had been discovered, before France’s ecology and energy minister, Ségolène Royal, moved to calm speculation.

Royal said that the French independent technical commission set up in the wake of the VW scandal, which presented its results to the minister in a meeting on Thursday, had found nothing wrong in Renault’s cars. She told journalists: “There is no fraud at Renault. Shareholders and employees should be reassured.”

However, Royal confirmed that Renault cars did emit carbon dioxide (CO₂) and nitrogen oxide (NO_x) emissions above accepted limits in their tests. Renault pledged in late 2015 that it would invest €50m (£38m) to bring its cars’ real-world emissions into line with those recorded under official test conditions.

As news of last week’s police raid emerged, Renault’s shares fell sharply, wiping €5bn (£3.7bn) off the company’s market value and depressing European markets. Already down around 2% on the back of lower oil prices, the French stock market, CAC, and its German counterpart, the DAX, extended their losses to more than 3% after the Renault reports.

A second French politician, economy minister Emmanuel Macron, played down the raids as “normal” checks, adding that no stigma was attached to Renault. The company said investigators had decided to carry out additional checks on parts and factories to look at the way it uses exhaust emissions technology, following an earlier investigation by the French government. 

The CGT union said that investigators took the personal computers of several Renault directors. A union official, Florent Grimaldi, told Reuters: “There were searches at several Renault sites by fraud investigators. Management has not confirmed that it is about NOx emissions but given the sectors that were inspected we think that it could be linked.

Shares in other carmakers also fell, with Peugeot down 5% even though the company said emissions tests carried out by the French energy ministry on its cars showed no anomalies and that it had not been subject to searches by fraud investigators. In Frankfurt, Daimler, BMW and Volkswagen also fell sharply alongside Renault, although they recovered much of their losses during later trading.

Volkswagen’s rivals have been drawn into the fallout from the scandal after increased focus on the real level of emissions from engines, which have been far higher in most vehicles than official test results show, even without the kind of cheat devices used at VW. Volkswagen is still facing fines that could potentially run into tens of billions of dollars in the US since it admitted rigging emissions tests for a range of its diesel vehicles.

The Environmental Protection Agency and VW are still in talks over remedies for around 500,000 affected diesel cars in the US, after Californian regulators rejected VW’s plans for a recall earlier this week.

VW’s chief executive, Matthias Müller, suggested fitting a catalytic converter could address the problem on most vehicles, though German press reports have suggested more than 100,000 cars would need to be bought back. In the meantime, VW has pledged at least $1,000 worth of compensation to American owners.

However, VW’s UK managing director has said there will be no compensation paid to British motorists, where 1.2m cars are affected. In a letter to the Commons transport select committee, Paul Willis said that VW did “not believe it was necessary” to compensate owners and that only “goodwill payments” tailored to different countries were being considered by the manufacturer.

Consumer groups in Britain called on the government to introduce tougher measures. Which? executive director Richard Lloyd said: “Volkswagen customers will be angry at this news and simply will not understand why US consumers are getting a goodwill payment and they’re not. British consumers deserve to be treated fairly. We urge Volkswagen to reconsider its position.”

VW disputes that the software installed in its affected diesel cars constitutes a “defeat device” in the EU, although it has accepted that the same software constitutes a defeat device in the US, under a “different regulatory framework”. MPs said they would be recalling Willis for further questioning by the committee.

By: Gwyn Topham &  Julia Kollewe. 

Review: Emerging Market Formulations & Research Unit, Flagship Records.
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