The End of a Legend 'Made in Germany' Label Badly Damaged By Car Scandal
Germany's diesel scandal occurred because the government has long been too lenient on the automobile industry. Deep ties between politicians and the sector allowed the situation to get out of hand, with enormous damage to the country's reputation as one of the world's best carmakers. By SPIEGEL Staff
Angela Merkel has a talent for being at the right place at the right time. She's currently in the village of Sulden in Southern Tyrol on vacation. The German chancellor is fond of hiking in the mountains, where she can catch fresh air and admire the spectacular, 1,900-meter-high (6,000-foot-high) Alps.
Some had hoped she would come down from the mountains to attend the diesel summit between carmakers and the German government on Wednesday and make a clear statement of position, like she did after the Fukushima nuclear disaster in Japan. At the time, she announced the phaseout of all German nuclear power plants. This time, she had the opportunity to chastise the automobile industry for knowingly and intentionally poisoning people and the environment with its diesel motors.
But Merkel doesn't enter into battles she can't win, which is probably why she sat this one out.
Instead, it was German Transportation Minister Alexander Dobrindt of the conservative Christian Social Union (CSU) party and Environment Minister Barbara Hendricks of the center-left Social Democratic Party (SPD) who demonstrated just how little power the government in Berlin has in standing up to the automobile industry. First, they had to move the meeting at very short notice to the Interior Ministry so that industry executives wouldn't have to have uncomfortable encounters with the protesters and environmental activists who had surrounded the Transportation Ministry. Even people who like fast cars can be cowards.
After the meeting, the ministers had to present its disgraceful outcome at a press conference -- with Dobrindt taking up its preemptive defense and Hendricks pale with anger over the arrogant executives. They presented the minimal consensus offered by the industry -- namely an update to the software used in over 5 million diesel automobiles. But even that figure had been airbrushed given that VW has already installed new software in 1.9 million cars. It is the solution that is by far the most inexpensive for the carmakers, and the worst for human lungs.
Of course, the government ministers are aware that this measure will not be sufficient to significantly improve the air quality in cities. Environmental organizations and experts have carried out those calculations and an administrative court in Stuttgart recently confirmed their findings.
Kowtowing to the Car Industry
It would have been easy enough for the government to use those verdicts as a pretext to go up against the industry. It likely would even have drawn applause given that pollster Civey recently found that 72.8 percent of all surveyed on the issue of air pollution believe the government is too lenient toward the automobile industry. Some 80.6 percent of urban residents say they would like to see less consideration of the industry's interests.
So why is the government kowtowing to the car industry?
The German automobile industry isn't just any industry. With around 800,000 jobs and over 450 billion euros in sales, it is one of the country's key sectors. Germany is the world's fourth-largest car producer. That puts it in a position to blackmail the government.
Pride also plays a role. The Germans invented the automobile and are still admired worldwide today for their engineering skill. "Made in Germany" is a symbol of quality -- especially when it comes to cars.
That was, of course, before people found out about the German engineers' dirty tricks and the fact that German politicians had spent years covering up the cheating. It is the result of an unsavory amalgamation of people and interests -- a system of mutual financial perks and party donations, and a supervisory authority that, as a result of lobbying work, has withered to the point that it has become an extended arm of the industry.
The government is no longer able to come down hard on carmakers because it has loosened the laws over the years to the point that few still have much impact. Heck, the company leaders may have had a good laugh about the government ministers' strict demands for a culture of greater corporate responsibility at the companies when they sped away from the meeting in their black limousines.
They feel unassailable -- too big to fail. It would have been hard to surpass the arrogance of VW CEO Matthias Müller at the press conference following the diesel summit. He said hardware improvements were out of the question and, besides, he had not recognized any "management failures."
No failures? What about the manipulated diesel emissions values, the defeat software used so that cars could cheat in emissions testing situations or the consultations between competitors that may have violated cartel law? And what about the threat now potentially being faced by millions of diesel car owners that their vehicles may soon be banned from driving in cities? They claim it was all legal. But was all of it legal?
Reporting by DER SPIEGEL shows that the companies didn't just coordinate on harmless issues like convertible tops. The documents submitted by VW when it turned itself in to the European Commission in Brussels and the Federal Cartel Office in Bonn for possible violations of cartel law include some potentially explosive revelations.
They indicate that Daimler, BMW, Audi and Volkswagen, by 2006 at the very latest, agreed in their working groups on how to deceive CARB and EPA, two U.S. government environmental agencies. They also agreed with car parts supplier Bosch on a joint software platform which included in its base version a defeat device that could manipulate emissions in each car in which it was installed. It meant that the so-called AdBlue technology built into the cars -- a urea solution that is used to reduce dangerous nitrogen oxide emissions in diesel motors -- would only truly comply with emissions standards in a lab testing situation. When driven on the road, however, they would emit far more nitrogen oxide. The deception made it possible for the companies to use smaller and less expensive tanks for the AdBlue technology.
They also colluded on their excuse to the U.S. authorities for how they could meet the nitrogen oxide emissions standards with such a small tank. Addressing the subject, a VW employee wrote that people were working in a "legal gray area."
Excuses? Gray areas? It sounds like a great deal of criminal planning. But, of course, they had no reason to fear strict oversight -- particularly when it came to politicians.
A Secret Meeting
It was late in the day on Nov. 3, 2015, when Angela Merkel's government buckled to the automobile industry. That night, German Transportation Minister Dobrindt and top officials in his ministry met with VW CEO Müller and VW supervisory board chairman Hans Dieter Pötsch. Few knew about the secret meeting and there are no notes from it.
The question at hand was what could be done about the millions of diesel vehicles in which the defeat software had been deployed? Would the cars have to be taken off the road? Or would buy-back programs like the ones offered by the company in the United States be required? It was clear to all that the last option wouldn't be possible. "That would have been the end of VW," recalls one government official.
The attendees at the meeting decided on a solution that would save VW. Müller had to agree to provide a software update. In exchange, the government would not pursue any additional legal channels that could damage Volkswagen. Dobrindt also wanted Müller to promise that no further defeat devices would be found in the company's vehicles. Müller dodged, because he could only hope for that to be the case.
But Müller was still given carte blanche. Since that meeting, Volkswagen has been able to claim that what is prohibited as manipulation in the U.S. isn't a crime in Germany. The other companies using similar cheat technologies were also spared. Auditors from the Federal Motor Transport Authority (KBA) dispatched by Dobrindt concluded that the tricks could be warranted for technical reasons. "The protection of motors is more important in this country than the protection of people's lungs," Jürgen Resche, the head of Environmental Action Germany (DUH), says angrily.
As soon as the German government starts expressing doubts, the automobile industry shows its instruments of torture. In July, the German Association of the Automotive Industry (VDA), a lobby group, presented a study by Munich's Ifo economic institute showing that 600,000 jobs in Germany dependent on the combustion technology. That has a way of keeping politicians in line, especially in an election year.
Since the days of former Chancellor Gerhard Schröder, who served from 1998 to 2005, Germany's leaders have been nicknamed the "Auto Chancellor" for their close ties to the industry. Schröder felt he was a patron of the industry. And Merkel, his successor, was quick to see the connection between maintaining close ties to the key industry and staying in power.
On Sept. 23, 2008, she spoke to workers at a Volkswagen factory. "The German government stands behind VW. VW is a great piece of Germany." The sheer mass of 18,000 workers seemed to awe her. She had likely never spoken in front of that many people at one time. She said she would travel home with the feeling that many workers at Volkswagen wanted "Germany to be doing well."
Observers of the chancellor say that visit to Wolfsburg had a deep impact on Merkel. A short time later, as the world faced a major economic crisis, she gave employees and executives at Germany's car companies a gift worth billions of euros in the form of government subsidies that saved jobs and kept the floor from falling out on the industry.
The unsavory symbiosis between the government, the industry and the lobbying groups -- and the revolving door of personnel moving between them -- seems to be the root of the evil. This ensures that the industry has influence and access, and assures employees money and access to the career ladder.
It can also cause a bit of head-scratching. A public servant who is supposed to one day passionately fight for the good of the people, is suddenly ready to contribute to their systematic poisoning only a moment later.
Former German Transportation Minister Matthias Wissmann, who served as a member of Merkel's cabinet and is also a friend, sticks out. Today he's the president of the German Association of the Automotive Industry (VDA). All he has to do to get the chancellor's attention is send her a text message on his mobile phone.
Merkel's former chief of staff at the national headquarters of her conservative Christian Democratic Union (CDU) party, Michael Jansen, now works at Volkswagen as the head of the VW's Berlin office, which conducts the company's lobbying. A few months ago, carmaker Opel's chief lobbyist, Joachim Koschnicke, left his job to join the CDU's election campaign team.
All have showered the federal government with emails and letters in recent years to ensure that their companies' interests are fulfilled.
In May 2013, VDA head Wissmann wrote to "Dear Angela" that she should try to hinder the European Commission's "excessive" proposals on CO2 targets.
VW lobbyist Jansen also wrote to the Chancellery in July 2015 that, on the issue of "air quality/diesel," the industry's proposals should be given the "greatest possible consideration."
When he was still an Opel lobbyist, Joachim Koschnicke warned the head of the KBA when approval was delayed for a new Opel model that without it, there would be "potential effects on our business operations." He said it jeopardized production at five plants and that the "negative effects would be dramatic in every aspect."
And then there's Eckart von Klaeden, who served as minister of state in the Chancellery from 2009 to 2013 and has since served as head of global external affairs at Daimler.
Klaeden, whose nickname is "Ecki," is a particularly brazen example. In May 2013, Klaeden announced that he would begin his job as Daimler's chief lobbyist in the fall. Previously, the aristocrat had enjoyed an exemplary career as a conservative politician. He completed a law degree at Germany's respected University of Göttingen, served in a fraternity, became active in the youth wings of the conservative Christian Democrats and got elected to the federal parliament, the Bundestag, at the young age of 28.
During his time as a minister of state, he had already developed good contacts to carmakers. Evidence also exists that he was informed of a Daimler financial transaction worth billions. Before the company sold its shares in the aerospace concern EADS in December 2012, he had documents sent to the Chancellery several times and also met with Daimler's bankers a total of 23 times.
There wasn't a lot of commotion around Klaeden when he first started his new job as Daimler's chief lobbyist. He's a man who prefers silent lobbying. But it didn't take long for him to face his first test. Daimler's diesel cars were emitting massive quantities of nitrogen oxide, which is deleterious to health. The company's engineers were only able to get the emissions systems on Daimler's luxury automobiles through the licensing authorities' test labs by using tricks.
But the measuring stations in German cities had been registering treacherously high levels of contaminants. In response, the European Commission wanted to end the practice of having vehicles tested exclusively in testing labs before they are authorized as roadworthy -- it wanted tests to take place on actual roads. The new procedure was called RDE, which stands for Real Driving Emissions. It threatened to expose the entire swindle.
- Part 1: 'Made in Germany' Label Badly Damaged By Car Scandal
- Part 2: Time Runs Out