BMW faces Indian import duty probe, possible fine: report
German carmaker BMW faces a fine of at least $100 million euros in India for alleged violations of import rules, WirtschaftsWoche reported.
Volkswagen (VOWG_p.DE) may face a new challenge to its bid for the top slot among global carmakers, as the very platform the German giant has spent the last six years creating to take it to a higher level in the rankings may not be working to plan.
BMW Group and PSA/Peugeot-Citroen will probably end cooperation on small gasoline engines when the project agreement lapses in 2016, a person familiar with the matter told Bloomberg.
India's customs office claims that BMW has for years declared imported car parts as part of larger assemblies rather than as separates, paying lower import duties than it should have as a result, the German weekly magazine said.
For the launch costs of the highly adaptable "MQB" vehicle platform, which was heralded last year by VW as the dawn of a new era for carmaking, keep weighing on profits and its eventual savings may fall short of ambitious targets, analysts said.
BMW no longer needs the partnership because the automaker is developing its own engines, while PSA is tightening ties with General Motors Co. in a broader alliance, said the person, who asked not to be named as the talks aren't public.
Customs authorities have imposed a fine of at least $100 million, which could grow further in a second stage, WirtschaftsWoche said, without specifying where it obtained the information.
They are now looking to third-quarter results on Wednesday to see how the program is progressing as the number of cars produced based on MQB grows.
The comments came as the French business newspaper Les Echos reported today that the carmakers plan to end the partnership.
It said BMW has appealed the decision.
A German acronym for "modular transverse matrix", MQB enables VW to design virtually all the small and medium front-wheel-drive models of its four biggest car brands on a single platform, affecting as many as 4 million vehicles a year, including the Golf and Audi A3.
The program's expiration would bring to an end joint work that started in 2002, when BMW and PSA agreed to develop and produce as many as 1 million small gasoline engines. They added plans later to make components for hybrid electric-gasoline systems. The hybrid portion unraveled last year after PSA and GM started setting up their partnership in early 2012.
A spokesman for the carmaker said an investigation was ongoing and the company was cooperating with Indian authorities. He declined to comment on the status of the probe.
Featuring a greater degree of plug-and-play modularity and parts commonality than at Toyota and General Motors Co , the new platform was hailed by analysts as the philosopher's stone for a company that wants to become the biggest and most profitable carmaker in the world.
The jointly produced engines are used in BMW's Mini small cars, Peugeot's mid-range vehicles and the Citroen brand's DS4 and DS5 models. The partnership was expanded in 2010 into four-cylinder motors.
Indian customs authorities were not immediately available for comment on Saturday./
VW has fanned those expectations, predicting the technology may reduce material costs by 20 percent and shorten assembly times by as much as 30 percent over time, yielding potential savings in annual costs which Morgan Stanley has estimated could total $19 billion by 2019.
The German company is developing its own architecture for three-, four- and six-cylinder gasoline and diesel engines. BMW CEO Norbert Reithofer was cited in July by German financial daily Boersen-Zeitung as saying the engines will also be used in the Mini.