In Germany, a Cozy Relationship Between Carmakers and Government

Source: By ALISON SMALE, New York Times • Posted: Thursday, October 1, 2015

Chancellor Angela Merkel of Germany with Herbert Diess, head of the Volkswagen brand, at the Frankfurt Motor Show in Germany last month. Credit Jens Meyer/Associated Press

BERLIN — The last president of Germany, the previous chancellor and the current deputy chancellor have all held the precious seat: a place on Volkswagen’s board.

The just-concluded Frankfurt motor show is a national event visited by leaders from all over the country.

For the auto industry, Germany sometimes operates like a company town, with a free flow of leaders between top posts in government and car manufacturers, and a level of national pride that was — at least until now — unrivaled by the United States.

But environmentalists and others say those close ties included doing the bidding of the auto industry, even on issues that run counter to Germany’s national goal of reducing carbon emissions, where it has served as a model for other industrialized nations.

With Germany’s biggest corporation undergoing the worst crisis in its 78-year history, new questions are being raised about what some see as the too-cozy relationship between Germany’s leaders and the auto industry. As the country’s No. 1 corporation, Volkswagen leads the way in an industry that directly or indirectly provides one in seven jobs.

While no government officials have been directly implicated in Volkswagen’s deceit — manipulating software installed in some 11 million of its cars to make emissions appear significantly lower than they were — some said that an industry that should have been closely scrutinized was instead given extensive support.

Now, as the scandal continues to unfold, those who once championed the manufacturers are rushing to dissociate themselves, either remaining noticeably mute on the issue or laying responsibility fully at Volkswagen’s feet.

“It is greed, for fame, for recognition,” Finance Minister Wolfgang Schäuble said this week. “One looks on in amazement and sees how it always ends up.” Noting that competition is incredibly tough in the global market, he said that Volkswagen would never return to the height of its past success.

“A lot will change from a structural perspective,” he said, without outlining what he expected. Mr. Schäuble does not have any direct ties to the company.

As government investigators scrutinize records and conduct interviews to assign blame for the tampering, there remains a real political risk. Chancellor Angela Merkel, though still popular, has lost some of her luster in recent weeks, as Germany and Europe struggle to cope with an influx of migrants that some charge she encouraged. The stain of Volkswagen has not helped.

Some critics said that the government does not need to have been blatantly involved in the emissions scandal for public officials to share some of the blame.

“I have seen the long arm of the car industry,” said Axel Friedrich, who retired as a senior official in the German Federal Environmental Agency in 2008 and spent 28 years watching the auto industry deflect demands to clean up its act and tackle well-known discrepancies between laboratory and real road tests of emissions.

“I have no illusions,” he said in an interview. “It’s a war. If you don’t understand the position of who you are fighting, you don’t stand a chance.”

The examples of government intervention are not hard to find. In the summer and fall of 2013, Ms. Merkel pressed Brussels and succeeded in overturning an already concluded agreement on cutting carbon dioxide emissions, postponing some regulations until 2021.

Ms. Merkel was said at the time to have worked with Enda Kenny, the Irish prime minister, on the lobbying effort.

In a new memoir, “Against the Grain,” published by Biteback in London, Norman Baker, a former British transport secretary, said that Britain’s prime minister, David Cameron, also succumbed to German requests after a telephone call from Ms. Merkel.

Mr. Baker said Mr. Cameron “erupted” over the decision, which was “taken to boost the long-term competitiveness of premium German brands” over rivals in Britain and elsewhere.

Rebecca Harms, a Greens deputy in the European Parliament, who comes from the state of Lower Saxony, where Volkswagen has its headquarters, said leaders in Portugal, whose economic recovery was faltering, were reminded that they might not get more auto plants, and jobs, if they did not back the German position.

At the time, Ms. Harms said that Ms. Merkel “has ridden roughshod over democratic process ‘by strong-arming other E.U. governments into reneging on this legislative agreement.’ ” The action, she added then, “is a shameful sop to German car manufacturers and will slow the development of new technologies” for less polluting cars.

Deutsche Umwelthilfe, one of Germany’s most established environmental groups outside the government, issued a detailed list this week of what it said were brushoffs from ministries over the past eight years concerning emissions of certain vehicles.

In one case, in March 2014, the group together with the environment minister, Barbara Hendricks, raised concerns that some 10,000 EvoBus buses made by Daimler had high nitrate oxide emissions, the group said. In the report, the group said it participated in a year of meetings and exchanges with senior ministry officials before receiving a letter from the minister saying that, despite some high emissions readings, the buses met European standards “so there is no legal basis on which to ‘demand’ technical improvements to the vehicles.”

A spokeswoman from Daimler noted that those buses performed below required emissions levels at certain low temperatures, for example at the start of their run, but not generally when in use. The spokeswoman, Uta Leitner, said new models do meet higher standards, known as Euro 6.

The ministry said in an email that the new standards had been in effect since December 2013 and noted that it was not up to the ministry, but Parliament, to change any laws.

Critics of government oversight point out that responses to complaints often result in finger-pointing between European and national institutions.

At the same time, there exists a revolving-door climate in which leaders glide between top posts in government and auto firms.

Ms. Merkel’s predecessor, Gerhard Schröder, is part of a long list of German politicians who have sat on the board of Volkswagen, whose unique structure accords the firm’s home state of Lower Saxony 20 percent of the company’s shares and reserves a board seat for the state’s governor, a position Mr. Schröder held before becoming chancellor in 1998.

Sigmar Gabriel, now Ms. Merkel’s vice chancellor and head of the center-left Social Democrats, followed Mr. Schröder in Lower Saxony. After that, Gov. Christian Wulff, later Ms. Merkel’s choice for president of Germany, was on the board.

The plentiful connections are not limited to Volkswagen. Eckart von Klaeden, a senior official in Ms. Merkel’s chancellery, became Daimler’s chief lobbyist in Berlin in 2013. He succeeded Martin Jäger, now spokesman for Mr. Schäuble.

Matthias Wissmann, the president of Germany’s top auto lobbying association since 2007, spent over two decades on the governing board of the Christian Democratic Union, Ms. Merkel’s party, and over five years as transport minister in the 1990s.

Thomas Steg, formerly a deputy spokesman for Mr. Schröder and Ms. Merkel, was appointed chief lobbyist for Volkswagen in 2011. The man who ran Ms. Merkel’s office at the Christian Democrats from 2006 to 2009, Michael Jansen, became Volkswagen’s man in Berlin last spring.

The government has demanded that Volkswagen produce an action plan by Oct. 7.

Since Volkswagen admitted to falsifying emissions tests in the United States, politicians and the auto industry have fallen notably quiet. Last Sunday, each side declined invitations to the country’s most popular TV talk show – “a really remarkable retreat from public view,” said the host, Günther Jauch.