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U.S. tariff threat hits European automakers' stocks

FRANKFURT, Germany — A U.S. warning that it may introduce tariffs on foreign auto imports hit shares in German carmakers BMW, Daimler and Volkswagen on Thursday, which together have a more than 90 percent share of North America's premium car market. Washington said on Wednesday it had launched an investigation into whether car and truck imports are a national security issue due to signs they had damaged the U.S. auto industry. That could lead to new U.S. tariffs — up to 25 percent — similar to those imposed on imported steel and aluminum in March. BMW and Daimler shares fell as much as 3.1 percent in early Thursday trading, while Volkswagen's dropped as much as 2.5 percent. "(U.S. President) Donald Trump is obviously not thinking about how to prevent a trade war. Import duties on cars would be a nightmare for the German auto industry and would lead to a massive sales impact," said Thomas Altmann at Frankfurt-based asset manager QC Partners. BMW on Thursday condemned the move to consider tariffs. "The BMW Group is committed to free trade worldwide. Barrier-free access to markets is therefore a key factor not only for our business model, but also for growth welfare and employment throughout the global economy," it said. Daimler, which makes Mercedes-Benz cars, and Volkswagen, which makes upmarket Audis and Porsches, were not immediately available for comment. German carmakers produced 804,000 cars at local factories in the United States and exported 657,000 German-made cars into North America last year, according to German auto industry association VDA. China took pains on Thursday to welcome German firms and investments, with Premier Li Keqiang talking up relations after a meeting with German Chancellor Angela Merkel. BMW and Mercedes have expanded production capacity in the United States, but BMW, Audi, Volkswagen and Daimler have also invested billions to build new factories in Mexico in the hope of selling locally produced cars into the United States. German carmakers hiked vehicle production in Mexico by 46 percent to 620,000 cars last year, while production levels inside the United States fell by 6 percent to 804,000 cars because of a shift to Mexico, according to the VDA. BMW has its biggest factory worldwide in Spartanburg, South Carolina, and is the largest vehicle exporter among all the carmakers in the United States measured by value of goods exported. More than 70 percent of BMW's U.S.-made cars are exported.

How should Volkswagen deal with its diesel problems?

The hounds of hell are bearing down on Volkswagen in the wake of allegations of cheating on diesel emissions testing. In just a single day, Volkswagen's stock has dropped 23 percent and the German government has announced that it is going to investigate a far larger number of vehicles over emissions violations. The American storm is quickly becoming a global one. Volkswagen sells over a million diesel vehicles a year and also has more than 13 percent of the automotive market overall – it was the number one automaker in the world up until the scandal. Yet in a matter of hours, Volkswagen has also become a pariah with potential fines and recalls that may be dwarfed by how the alleged lies and deceit change how governments and consumers view the company. Consumers are really going to be the key to the company's survival. It's those consumers who are really going to be the key to the company's survival. Every single one of them now finds themselves with a product that was sold illegally and may not be registered until recall work is done. What's worse is that Volkswagen doesn't yet have a solution for the emissions issue to offer these customers. It should also be noted that this is not the first time Volkswagen has found itself in violation of EPA emission regulations. Volkswagen is in a world of trouble, so what now? As a car dealer and former financial analyst who took several companies public, I believe Volkswagen can and should consider three points of action that would make an enduring difference in the times to come. 1. Offer affected TDI owners a compelling reason to stay with the brand. Recall work and a cup of coffee at the dealership are not going to be enough to placate current owners. Volkswagen should provide compensation for customers at the earliest opportunity and offer some type of inducement that keeps them within the fold. This shouldn't be the industry's version of a Chuck E. Cheese coupon - a small discount on a new vehicle. Volkswagen needs to offer something along the lines of a strong warranty extension of the entire powertrain (not just the emissions system) or some type of valuable feature upgrade for these vehicles so that owners feel that they have been treated fairly. Perhaps a combination of a brand new navigation system, software upgrades for the infotainment components, or some type of basic free WiFi service would be a healthy act of generosity.

Audi is working on a suspension that gets power from bumpy roads

Regenerative brakes aren't new. They're on virtually every hybrid and EV, and they're even starting to pop up on traditional gas-powered cars, like with the i-ELOOP-equipped Mazda6. But even with these systems, cars can get more efficient, and Audi thinks it found yet another source of wasted energy. The source? The suspension. The idea is to turn the kinetic energy that goes into the dampers into usable energy instead of as waste heat. Audi isn't the first auto company to come up with regenerative suspension – nearly three years ago, ZF introduced its GenShock technology, which used a valve attached to traditional, oil-filled hydraulic shocks to recapture kinetic energy from movement caused by bumps in the road. Audi's prototype technology, which it calls eROT, replaces traditional dampers with horizontally oriented electromechanical rotary dampers. eROT is apparently short for electromechanical rotary damper. Neat. In testing, eROT recovered an average of 100 to 150 watts on a typical German road, three watts from a fresh piece of pavement, and 613 watts on a rough stretch of tarmac (wattage is calculated as power over time, so this is actually the rate at which the system harvests energy). The dampers channel that energy to a tiny, 0.5-kWh, 48-volt battery. The prototype is claimed to cut CO2 emissions by three grams per kilometer (4.8 grams per mile), while the company believes a future production version could save up to 0.7 liters of fuel per 100 kilometers of driving. Converting the savings to American miles per gallon isn't easy, so we'll use a practical example. In the US, the Q7's supercharged 3.0-liter V6 returns a combined rating of 21 miles per gallon, which works out to 11.2 liters per 100 kilometers. Apply eROT's 0.7L/100km savings, and the Q7's economy would improve to 10.5L/100km, or 22.4 mpg, a 1.4-mpg improvement. That's not huge, but because math, 0.7L/100km is more dramatic on a more fuel efficient vehicle – taking an A3's 27-mpg combined rating and adding eROT would drive efficiency up 2.4 mpg, for example. There are a few other big benefits beyond fuel and emissions savings – Audi claims eROT provides a more comfortable ride than traditional active suspensions, because engineers can tune the compression and rebound strokes independently of each other. Beyond that, the horizontally oriented rear suspension geometry means more cargo space, since the dampers don't poke up into the cabin like they normally do.