The World from Berlin 'Anachronism of German Industry'

When the EU's highest court struck down a law that kept Volkswagen snug under a government umbrella for 47 years, it also ended state meddling in the free market. Or was it a classic example of state meddling? German commentators discuss.

Off with the kid gloves.
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Off with the kid gloves.

It's name means "car of the people." And for decades, Volkswagen has been just that. Not only is the company closely associated with Germany's post-World-War-II economic miracle, but the rattling, air-cooled "Beetle" quickly became symbolic of a more modest and quietly prosperous Germany in the post-war years.

The company management has likewise long been associated with German governments. Indeed, VW was even founded by government decree -- delivered by Adolf Hitler. Now, though, VW's ties to politics have been significantly weakened.

The European Court of Justice in Luxembourg on Tuesday overturned the so-called "VW law," saying it contravened European free-market laws. The verdict essentially clears the way for Porsche -- also a German firm, only smaller and leaner -- to buy a controlling share of stock and run VW as it sees fit.

The old law limited shareholders in Volkswagen to a 20-percent portion in voting rights no matter how much they owned. Porsche now owns 31 percent of the company and is interested in investing more. But its decision-making power has been restricted to a level equal to the power of Lower Saxony's, the German state where Volkswagen is based. Lower Saxony is VW's second-largest shareholder and its traditional patron.

The government involvement has made Volkswagen a minor workers' paradise, with the highest factory wages in the German car industry. But the company has also been less efficient than it could be, according to German commentators on Wednesday, who greet the end of its postwar patronage with a mixture of hope and skepticism.

The Financial Times Deutschland writes:

"An anachronism of German industrial history has ended. The state of Lower Saxony should take responsibility for the situation and end yet another anachronism: State premier Christian Wulff should sell the state's 20-percent share of the company and end the old convention of state involvement in Europe's largest auto manufacturer."

"(But) the state wants to hold onto its VW shares, to continue wielding influence over the firm -- regardless of how large this influence might turn out to be. Wulff is therefore sacrificing the chance to turn Volkswagen, at last, into a company that acts according to pure economic criteria and not according to the political calendar."

The left-wing daily Die Tageszeitung writes:

"The EU, which pressed its case against the German government in the Luxembourg court, has meddled deeply in the political economy of a member state.… By fixing a strong deregulation course it has accepted into the bargain that its people, who are already afraid of wage-dumping and unemployment, should find another reason to see Brussels as a threat. That can't be healthy for the overall project of European integration."

"Critics of privatization justifiably fear that after a takeover, only the investors' interests will be served -- at the expense of the workers, the product and the company's infrastructure. The debates (in Germany) over limiting the influence of hedge funds or state funds on key national industries show that the (public's) faith in the market's self-regulatory nature has been rattled."

The center-right Frankfurter Allgemeine Zeitung writes:

"The Porsche family knows a multibillion-euro investment in Volkswagen isn't free of risk. In this case the tail would wag the dog: A small corporation, Porsche AG, with an annual turnover of €7 billion, will take over a firm with a turnover of €100 billion. If something goes wrong, even the assets of the frugal family will be in danger."

"And how has Lower Saxony responded to the demise of the VW law? State premier Wulff wants to hang onto the government's shares, although now he won't have much say in the fate of the company in Wolfsburg. Just for tactical political reasons he should sell the shares."

The center-left Süddeutsche Zeitung writes:

"The recent history of Volkswagen shows that the well-intended protection of jobs through state intervention can lead to disaster -- and how the theoretically nice idea of consensus between labor and capital can achieve the opposite of what it should achieve."

"In a market economy it's not easy to say what is in the 'social interest' and what isn't. What looks like employee protection can quickly become the reverse and threaten jobs. The same goes for the VW law. It was supposed to serve the workers. But in fact it has harmed many workers at VW because it gave them an illusion of security which no longer existed."

-- Michael Scott Moore, 12:30 CET


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