Germany's powerful auto bosses are used to warmer welcomes when they meet with the chancellor. At this week's car summit, Angela Merkel ignored their courting and kept her wallet tight — a good sign says Henrik Böhme.
German car industry leaders know how to use a bit of arm-twisting when they seek favors from the government. In an almost routine fashion, they would raise the specter of massive job losses if, for example, an economic downturn had hit the industry, or the European Commission was once again showing some determination to lower CO2 emissions thresholds.
The result often was either a new cash-for-clunkers program to spur car sales, or assurances from government leaders of all political stripes to wield their influence in Brussels to push for policies that are more conducive to the carmakers' special interests.
But the times have changes, and let me add — at long last.
Following the latest car summit — a term which in itself shows the "summit" hype that's been engulfing the German chancellor's office for a while — the auto bosses went home empty-handed, with only a lukewarm promise that the government will install a working group to examine their troubles.
The panel will be charged with studying "market-oriented concepts" of how to boost the capital of auto industry suppliers during the current virus-induced slump, as its primary goal.
There are two aspects I find most astonishing in the aims stipulated for the working group.
First, the emphasis on market orientation. Looking at the multi-billion euro support programs earmarked by the government to overcome the ravages of the COVID-19 crisis, I almost felt like the old East German planned economy has returned to Germany.
Second, the government's new focus on suppliers, which seems to mark a shift away from supporting primarily the big manufacturers in past crises.
Germany's huge army of small and medium-sized companies (SMEs), which ensures a steady supply of parts to Big Auto, indeed deserves becoming the focus of support, because many of them are threatening to collapse under the weight of the downturn.
Also bearing down heavily on them is the burden of the ongoing car revolution forcing an entire industry to shift away from the internal combustion engine to alternative modes of driving. A company that has produced motor blocks for decades is no longer needed in the dawning era of battery-powered vehicles.
Moreover, the plight of suppliers is nothing new to an industry where the big manufacturers are using all means available, often very unfair ones, to squeeze as many euros as possible out of their supply chains to cut a better margin.
There's no denying that the German automobile industry is hugely important for the country and the well-being of its citizens. But it's similarly true that the industry has grown fat in its comfort zone, as it's been operating under the illusion that sales and profits go up eternally.
But outside, in the far distance, many new rivals that were initially laughed at are now approaching fast, and setting the tone and pace for the new carmaking era. To make matters worse, much of German carmakers' impeccable image has melted away like snow in the sunshine amid a series of scandals such as VW's dieselgate. Trickery and deceit is apparently no longer wanted in the chancellor's office.
The attitudes in Germany's second-largest industrial sector, machine-building and electrical engineering, are quite the opposite to those of the carmakers. Although similarly hard-hit by the coronavirus crisis, you don't hear calls for the government to finance benefits to customers who want to replace their old machines.
Sales in the sector are expected to plunge 17% this year and many jobs are on the line there, too. But as in the past, industry representatives are hardly being seen lobbying on the chancellor's doorstep.
In this crisis, the German state is digging deep into its pockets to support the economy, with billions of euros earmarked for both fiscal stimulus and direct government aid. The country's carmakers are getting about €2 billion ($2.36 billion) under special programs aimed at fostering innovative technologies. In addition, the industry's shift toward electric vehicles is being facilitated with massive public investment in domestic battery production.
German auto bosses should, therefore, restrain themselves in their demands for more state money. After all, this might create an unholy dependency and wouldn't help them at all.
The fate of the hard coal mining industry should serve as a graphic reminder of the economic blind alleys public subsidies can lead into. Decades of generous state support may have helped thousands of miners reach retirement age, but real structural change in the mining heartland of the Ruhr Valley region has never gained traction.
And so it must be welcomed that the government wants to push for market-oriented solutions to the current crisis, and apparently no longer is pursuing the socialist idea of a making the state a shareholder in private companies through a government-financed fund. The concept was called for by an alliance of Social Democrats, the Greens and trade union bosses in Germany, but was brushed aside on Tuesday. I'm eager to learn what's next on the negotiating table when Chancellor Angela Merkel calls a summit.