As German Election Looms, Politicians Face Voters’ Wrath for Ties to Carmakers

Source: By JACK EWING, New York Times • Posted: Friday, September 15, 2017

Chancellor Angela Merkel and her political rivals consider automakers toxic and have begun to distance themselves from them. Fabrizio Bensch/Reuters

FRANKFURT — Sometimes it is hard to tell where the German government ends and the auto industry begins.

Daimler and Volkswagen’s top lobbyists were once close aides to Chancellor Angela Merkel. The foreign minister, Sigmar Gabriel, used to sit on Volkswagen’s supervisory board. Ms. Merkel herself once buttonholed the governor of California to complain about the state’s strict emissions standards.

Those close relations between public officials and car manufacturers were once considered vital economic policy for Germany’s most important export. Now, they are a political liability.

Weeks before national elections, voters increasingly see the government as complicit with carmakers in a widening diesel crisis that threatens the German economy. While Ms. Merkel is still heavily favored to win, the chancellor and her political rivals consider the automakers toxic and have begun to distance themselves from them.

The backlash has been building since 2015, when United States regulators uncovered widespread emissions cheating by Volkswagen, Europe’s largest automaker. The broadening case, which has also ensnared BMW and Daimler, has called attention to the harmful effects of nitrogen oxide emissions from diesel vehicles. Cities across Europe are considering diesel bans, and sales of diesel engines are plummeting.

“I’m just as angry about the fraud as you,” Ms. Merkel said in an interview with the magazine Der Spiegel published Sept. 2, illustrating her newly critical attitude toward the industry. But she has not completely abandoned the industry. Ms. Merkel is scheduled to speak at the opening ceremony for the International Motor Show in Frankfurt on Thursday.

Why Diesel Became So Popular in Europe

Over the last 20 years, diesel cars have taken a strong hold on the European market, thanks in large part to regulations that made them cheaper to fill up than gasoline-powered cars.

  • In the late 1990s, European fuel taxes — already higher than those in the United States — were modified to make diesel cheaper than gasoline, in an effort to reduce carbon dioxide pollution. This encouraged drivers to buy more diesel-powered cars. Diesel burns more efficiently than traditional gasoline and produces less of the greenhouse gas over all.
  • Diesel emissions, however, emit more nitrogen oxides and particulates, two components of smog that affect breathable air quality more than carbon dioxide. American policy makers put more emphasis on these emissions than their European counterparts did, so diesel continued to languish in the United States even as it reached a dominant market position in Europe.
  • Investments in electric cars and alternative fuels, such as hydrogen, are further highlighting diesel’s shortfalls and encouraging European consumers to move away from what has been their preferred fuel for a decade. After reaching a peak market share near 56 percent in 2011, diesel has slowly fallen out of favor there, dipping below 50 percent in 2016.

For decades, the German government has been a crucial ally for carmakers, operating as a de facto lobbyist for the industry.

With the active support of officials, automakers used their political clout in Brussels to block stricter emissions regulations and to promote subsidies for diesel. German leaders, including Ms. Merkel and her predecessor, argued against tough emissions rules and pushed for better terms for the country’s carmakers abroad.

Most recently, Germany led a group of auto-producing countries in weakening European emissions testing procedures that were designed to prevent the kind of deception committed by Volkswagen. New cars must pass road tests. Previously, they had to pass only laboratory exams, which Volkswagen and other carmakers were able to game. But, at German insistence, cars can emit double the legal limit of nitrogen oxides and still be approved.

German political leaders and automakers have worked together to promote diesel technology since the 1990s. Ms. Merkel’s predecessor, Gerhard Schröder, was proud to be known as the “auto chancellor.”

Germany has taxed diesel fuel at a lower rate than gasoline since the 1980s, originally to make truck transport, which is predominantly diesel, less expensive. The goal, according to a 2011 study by Transport and Environment, an advocacy group in Brussels, was to lower costs to help German manufacturers compete internationally.

In the 1990s, the auto industry preserved the subsidies by convincing politicians that diesels were better for the environment than gasoline engines, a dubious claim given the other pollutants that diesel spews. For years, environmentalists’ calls to raise diesel taxes have met opposition from the country’s largest political parties, including Ms. Merkel’s Christian Democrats.

Backlash against automakers has been building since 2015, when United States regulators uncovered widespread emissions cheating by Volkswagen, Europe’s largest automaker. Carsten Koall/European Pressphoto Agency

Those tax breaks have ensured that diesel is significantly cheaper at the pump, leading to a steady rise in the popularity of diesel-powered cars. Until recently, they outsold their gasoline-powered counterparts around Europe.

German carmakers and politicians engaged in a similar battle in Brussels, fighting for years to bat away tougher emissions rules. In 2013, Germany used its clout as the European Union’s largest economy to intervene when the bloc’s executive arm wanted to tighten limits on carbon dioxide emissions.

Matthias Wissmann, head of the German Association of the Automotive Industry and a former transportation minister, wrote a letter to Ms. Merkel, warning that the new standards would hurt sales of German luxury cars. In that letter, he addressed Ms. Merkel as “du,” the informal German word for “you” normally used only between close friends.

Ms. Merkel then personally called Prime Minister Enda Kenny of Ireland, who held the rotating presidency of the European Council, and persuaded him to delay a decision. The standards were eventually watered down.

German leaders campaigned for carmakers farther afield, too. On a trip to California in 2010, Ms. Merkel complained about the state’s strict limits on nitrogen oxides during a meeting with Gov. Arnold Schwarzenegger.

“She said, ‘Your nitrogen oxide limits are too strict, and that is hurting our German diesels,’” Mary Nichols, the chairwoman of the California Air Resources Board and an attendee at the meeting, said in testimony to the German Parliament in March. “She was there, it seemed, as spokeswoman for the auto industry.”

The bond between politicians and automakers persisted even after the Volkswagen scandal erupted.

Stephan Weil, prime minister of Lower Saxony, home of Volkswagen, conceded in August that he had allowed company lobbyists to vet a 2015 speech about the emissions deception. The state of Lower Saxony owns a 20 percent stake in Volkswagen, and Mr. Weil sits on the carmaker’s supervisory board.

Mr. Weil, a member of the Social Democrats, denied making significant changes to the speech after it was shown to Volkswagen. Thomas Steg, head of government relations for the carmaker, said Volkswagen looked only for factual errors.

The case, first reported by the newspaper Bild am Sonntag, helped spur a turnaround in public perceptions of diesel, once a point of national pride.

The diesel engine, like the automobile, was a German invention, and the country’s carmakers leveraged their know-how to achieve dominance in the European luxury car market. The auto industry, including suppliers, currently employs about 2 percent of the German work force, according to Commerzbank.

Against that backdrop, deep political ties were forged.

German carmakers have often recruited government insiders to represent their interests. Mr. Steg of Volkswagen was once a spokesman for Ms. Merkel. Eckart von Klaeden, responsible for Daimler’s relations with governments worldwide, served under her as a junior minister.

All of the country’s main parties, even the environmentalist Greens, have long histories of amiable relations with the auto industry. Joschka Fischer, a former foreign minister who for many years was standard-bearer for the Greens, now works as a consultant to BMW, though the carmaker says he does not do any lobbying.

Stephan Weil, left, the prime minister of Lower Saxony, home of Volkswagen, in 2013 with Martin Winterkorn, who was the chief executive of Volkswagen at the time. Nigel Treblin/Volkswagen, via European Pressphoto Agency

While money plays a much smaller role in election campaigns in Germany than in the United States, the auto companies nevertheless make their presence known. Daimler, for example, contributed 100,000 euros, or about $120,000, each to Ms. Merkel’s party and to the Social Democrats, according to documents filed at the German Parliament. The carmakers also help to finance party events and loan cars for free to elected officials, activities that they are not required to disclose.

BMW said in a statement that it had tightened its rules on interactions with politicians, ensuring, for example, that parties report the use of vehicles as a financial contribution. Daimler did not respond to a request for comment.

Mr. Steg, the Volkswagen lobbyist and former aide to Ms. Merkel, said a close relationship between carmakers and politicians was of common interest. Others argue that lobbying helps auto executives understand the workings of government, and public officials understand the car business.

“The government has its own positions,” said Mr. Wissmann, the head of the auto industry association. “It has not simply followed the positions of the auto industry blindly.”

Since the end of World War II, Mr. Steg said, “politicians have always had a huge interest in the well-being of the industry and the creation of jobs.”

As the scandal’s focus expanded, German officials have found themselves on the defensive.

The government’s own study last year showed that virtually all makers of diesel cars had flouted emissions limits, but Ms. Merkel’s ministers did not impose penalties. Germany now faces a lawsuit by the European Commission over failures to enforce the bloc’s clean air rules.

The German government has also rejected calls to require carmakers to install better emissions equipment in older diesel vehicles. Britain and France have promised to ban internal combustion engines starting in 2040, but Germany has not done the same.

“They take the line of industry,” said Julia Poliscanova, manager of clean vehicles and air quality at Transport and Environment, an advocacy group in Brussels, “instead of citizens and public health.”