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German leaders in spot over ties to carmakers

Last Updated 18 September 2017, 18:33 IST

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. 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 Merkel is still heavily favoured 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 US 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,” Merkel said in an interview recently, illustrating her newly-critical attitude toward the industry. But she has not completely abandoned the industry. She opened the Frankfurt motor show on Thursday.

De facto lobbyist

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 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. Merkel’s predecessor, Gerhard Schröder, was proud to be known as the “auto chancellor.”

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 Merkel, warning that the new standards would hurt sales of German luxury cars. In that letter, he addressed Merkel as “du,” the informal German word for “you” normally used only between close friends.

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, Merkel complained about the state’s strict limits on nitrogen oxides during a meeting with Governor 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% stake in Volkswagen, and Weil sits on the carmaker’s supervisory board.

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.

German carmakers have often recruited government insiders to represent their interests. Steg of Volkswagen was once a spokesman for 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.

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 each to 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.

Steg said a close relationship between carmakers and politicians was of a 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 Wissmann, the head of the auto industry association. “It has not simply followed the positions of the auto industry blindly.”

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

“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.”

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(Published 18 September 2017, 18:33 IST)

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