UPDATE 1-EU warns Germany over Mercedes car coolant

Tue Jul 9, 2013 1:27pm EDT

* EU confirms that France blocking some Mercedes sales

* Daimler says French action starting to hurt sales

* Germany could face infringement action - EU spokesman

* German lawmakers see link with CO2 row (Adds CO2 deal returned to provisional agenda)

By Barbara Lewis and Andreas Cremer

BRUSSELS/BERLIN, July 9 (Reuters) - The European Commission has warned Germany it faces possible action over Daimler's refusal to remove a banned refrigerant from new cars, after France moved to block most Mercedes sales within its borders.

France has halted registrations of non-compliant Mercedes models, the EU executive also confirmed on Tuesday, the latest sign of tension between Germany and its European partners over the direction of auto industry policy and regulation.

Officials are investigating the German luxury carmaker's refusal, backed by Berlin, to follow an EU directive banning the air-conditioning coolant R134a, Commission spokesman Carlo Corazza told Reuters.

If the breach is confirmed, Brussels "may take necessary action including, where appropriate, infringement procedures" against Germany, Corazza said in a written statement.

Officials at several French government ministries declined to comment. French Industry Minister Arnaud Montebourg, when asked on Monday about the sales freeze, said: "I have not been informed about this."

Daimler has said that French authorities are blocking new registrations of its Mercedes SL sports car and A-Class and B-Class subcompacts, which together represent more than half of the brand's sales in the country.

France's effective sales ban on vehicles assembled since June 12 is just beginning to hurt deliveries, according to a company spokesman, who said he was unaware of any restrictions in other EU states.

The carmaker insists its refusal to phase out R134a, a global warming agent more than 1,000 times more potent than carbon dioxide, is justified by safety concerns. The only available replacement, Honeywell's R1234yf, can emit toxic hydrogen fluoride gas when it burns.

Based on 2012 deliveries, Daimler said the French registrations freeze could affect about 2 percent of its global sales, or 29,000 cars.

CONFLICTING INTERESTS

The refrigerant dispute follows a bitter row over the next wave of EU vehicle emission rules, in which German Chancellor Angela Merkel lobbied in vain for larger CO2 loopholes, then intervened to prevent a vote.

"The controversial CO2 debate showed that Europe is grappling with divergent interests among its key players," said Steffen Bilger, a federal lawmaker with Merkel's governing CDU party and who sits on the cross-party transport committee.

"It can't be ruled out that Germany's voting behaviour also played a certain role" in France's decision to halt Mercedes registrations, he said.

Green Party lawmaker Anton Hofreiter, who chairs the same Bundestag committee, said Paris was "clearly seizing the opportunity to snipe back at Germany" over its CO2 stance.

He added: "The French example may catch on with other countries; for instance, Italy."

Daimler's non-compliance may offer leverage for France, Italy and other governments to press for a vote on the stalled CO2 deal, which sets out rules by which average car emissions must be cut to 95 grams of CO2 per kilometre in 2020.

The CO2 compromise has been placed back on the provisional agenda for a possible vote next week, said two European diplomatic sources who asked not to be identified.

EU officials and member state diplomats will also discuss the deepening standoff over coolants in Brussels the same day, the Commission said.

DANGER TO HEALTH?

The EU "mobile air conditioning" directive 2006/40/EC took effect on Jan. 1, banning the use of R134a in models approved for sale since the start of 2011. Vehicle types certified earlier, or their derivatives, have until 2017 to comply.

After safety tests, all other European carmakers have switched their newest models to the coolant developed by Honeywell in partnership with Dupont. But Germany's transport authority KBA backs Daimler's refusal to use it.

The federal agency has given Daimler permission to continue using R134a pending further safety assessments, in defiance of the directive.

"It can't be ruled out that the new coolant ... may endanger vehicle passengers and other road users," the German transport ministry said in a statement.

Available scientific findings do not yet allow for a final risk assessment, it added.

The KBA and Transport Minister Peter Ramsauer have both written to Brussels, arguing that Daimler should be allowed to continue using the banned refrigerant until their own scientific evaluations are complete.

"With this action, it's possible Daimler may consider that its vehicles no longer have to comply," EU spokesman Corazza said.

The Commission is committed to ensuring the highest level of vehicle safety and "has the duty to ensure that European Union law is uniformly applied", he added. (Writing by Laurence Frost; Additional reporting by Hendrik Sackmann in Stuttgart and Gilles Guillaume in Paris; Editing by Tom Pfeiffer and David Goodman)

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