Dieselgate: the cozy ties between Germany's car industry and Berlin exposed

Even in the quiet summer months, Dieselgate and whispers of industry collusion loom large. Critics say Berlin should end its close friendship with carmakers. Both sides are currently holding a much-anticipated summit.

Germany's automobile production is vital for its economy. "We need a strong and innovative auto industry, but also an honest one," said Ulrike Demmer, the German government's deputy spokesperson. 

"Criticism for what deserves criticism," she said. "But always with the knowledge that this is a strategically important industry for Germany."

Read more: The political tug-of-war over diesel

Demmer declined to elaborate on what "strategically important" means. In numbers, it is 800,000 jobs directly created by the automobile sector and as many as another 500,000 indirectly. German cars account for one-fifth of the country's exports.

Business | 09.01.2015

Banks were called "too big to fail" during the financial crisis. It is fair to apply the same term to Volkswagen, Mercedes and BMW. Without its car manufacturing, Germany's economic might would be done for.

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Huge network

What would Germany be without its automotive sector? The industry comprises over 1,300 companies with a workforce of at least 20 people.

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Big employer

Germany's car industry provides jobs for some 828,000 people at home. This accounts for no less than 14 percent of the country's manufacturing industry workforce.

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Impressive sales

In 2016, the industry generated sales to the tune of 407 billion euros ($478 billion). Some 63 percent of that amount was acquired from overseas.

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VW scam a game changer

In the wake of Volkswagen's admission to using emissions data rigging defeat devices in 2015, the number of diesel-powered vehicles has been declining.

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Declining share

The share of diesel vehicles in new car registrations in Germany dropped to under 45 percent last year, hitting the lowest level in five years.

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Stable overall output

But that hasn't affected total German passenger car production. It has hovered around 5.7 million units for three years now, up from roughly 4.7 in 1991.

Key positions for lobbyists

A back and forth between politics and the car industry has been the norm for decades. Angela Merkel's Minister of State, Eckart von Klaeden, is now chief lobbyist for Daimler – as was Martin Jäger, a former spokesperson for the Federal Foreign Office who is now at the Interior Ministry for the state of Baden-Württemberg. Thomas Steg, a former government spokesperson, holds that job title for VW. Matthias Wissmann was a member of parliament for more than 30 years before becoming president of the German Automobile Industry Association, a position he has held for a decade.

Read more: Massive collusion amongst German automakers

The German state of Lower Saxony has a 20 percent stake in Volkswagen. Long before he became foreign minister, Sigmar Gabriel was the state premier of Lower Saxony. That put him on Volkswagen's supervisory board from 1999-2003, a post now filled by the current state premier, Stephan Weil. Information like this is available at lobbyfacts.eu.

"The fact is,the state was far too close to the car industry in the past," said Environment Minister Barbara Hendricks.

Infografik Das Geflecht von Politik und Autoindustrie ENG

Money and more money

The interconnection between politics and industry is not only through people, but also money. The automobile industry is a major donor to all political parties: In April, Daimler sent 100,000 euros ($118,174) to both the CDU and SPD – for years, a common sum. Stefan Quandt and Susanne Klatten, principal shareholders of BMW, each donated 50,000 euros ($59,000) to the CDU and FDP. The Greens' Winfried Kretschmann, state premier of Baden-Württemberg, a German car center, came into 110,000 euros ($130,000) from Südwestmetall in 2016.

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Read more: The trouble with diesel bans

Lobbyists "drop lawmakers hints as to the auto industry's interests, and they often listen and gladly help," a report by Greenpeace stated last year. "The sector influences policy framework to ensure business flourishes with high performance cars."

Economy versus ecology

Germany's auto industry, and in particular, VW, the world's largest carmaker, earn a lot of money with high performance cars, especially overseas. The domestic and EU markets are just a part of total earnings. China and India are major markets, home to hundreds of millions of potential first-time drivers.

Read more: Volkswagen faces new California fine over 'Dieselgate'

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The disaster unfolds

About two weeks after Volkswagen admitted behind closed doors to US environmental regulators that it had installed cheating software in some 11 million of its diesel vehicles worldwide, the Environmental Protection Agency shared that information with the public. It was Sept. 18, 2015. The ensuing crisis would eventually take a few unexpected turns.

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The boss must go, long live the boss

Volkswagen's then-CEO Martin Winterkorn (above) had little choice but to step down several days after news of the scandal broke. In September, he tendered his resignation, but retained his other posts within the Volkswagen Group. Winterkorn's successor was Matthias Müller. Until taking the reins at VW, Müller had been the chairman at Porsche, a VW subsidiary.

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Raiding headquarters

Regulators in the US weren't the only ones investigating VW. Authorities in Lower Saxony, the German state in which VW is based, were also scrutinizing the company. On October 8, state prosecutors raided VW's headquarters along with several other corporate locations.

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Hell breaks loose

On January 4, 2016, the US government filed a lawsuit against VW in Detroit, accusing the German automaker of fraud and violations of American climate protection regulations. The lawsuit sought up to $46 billion for violations of the Clean Air Act.

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Quit or forced out?

In March, the head of VW in the US, Michael Horn, resigned. In the initial days and weeks after the scandal broke, he was the one US authorities turned to for information. He issued an official apology on behalf of the automaker, asking for the public's forgiveness.

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Settlement

On October 25, a US judge approved a final settlement that would have VW pay $15.3 billion. In addition, affected cars would be retrofitted with better, non-deceptive hardware and software, or else VW would buy them back completely from customers.

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Imitators

When dieselgate first emerged in 2015, analysts said it was likely other car makers were also cheating tests. But It wasn't until 2017 that other companies were targeted in probes. In July, German authorities launched investigations into luxury car makers Porsche and Daimler for allegedly cheating emissions tests. Others, such as Audi and Chrysler, have also been hit by similar allegations.

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Public still supportive

Despite dieselgate, VW has managed to keep the emissions scandal from utterly tarnishing its image. According to several polls, between 55 to 67 percent of Germans continue to trust the automaker. In the US, polls show that roughly 50 percent still believe the German company produces worthwhile vehicles.

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Fuming over monkeys

In late January, however, VW suffered another heavy blow over reports that the company experimented on monkeys and made the animals inhale diesel fumes. To make matters worse, a separate experiment that had humans inhale relatively harmless nitrogen dioxide was revealed at the same time. Some media wrongly interpreted this to mean humans were also inhaling toxic fumes.

Low-emissions vehicles have met a mixed response. VW's three-liter car at the turn of the new millennium had tepid sales. Germany is far from its goal of putting one million electric cars on the streets by 2020. They remain expensive and their batteries provide limited range. Amid the diesel scandal last summer, a billion-euro government incentive program for electric cars failed to see a major return on investment.

Good lobby, bad lobby

"The concluding report of the Bundestag's emissions inquiry again proves that the federal government puts corporate interests above environmental and consumer protection," Christina Deckwirth wrote in June for the NGO, Lobbycontrol. "Ultimately, the government let an expert with ties to the industry sugarcoat the diesel scandal."

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