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A Delicate Visit to Volkswagen

Der niedersächsische Ministerpräsident Stephan Weil (l, SPD)und Matthias Müller, Vorstandsvorsitzender der Volkswagen AG, nehmen am 09.08.2016 im Volkswagenwerk in Wolfsburg (Niedersachsen) im Rahmen der Sommerreise des Ministerpräsidenten an der Begrüßung in der Lernwerkstatt teil. Bei der vom 8. bis 10. August dauernde Sommerreise besucht Weil die Mobilitätsregion Ostniedersachsen. Foto: Sebastian Gollnow/dpa +++(c) dpa - Bildfunk+++
Lower Saxony's state premier Stephan Weil (left), with VW chief Matthias Müller at company headquarters in Wolfsburg. Photo: DPA/Sebastian Gollnow
  • Why it matters

    Why it matters

    As one of Lower Saxony’s largest employers, Volkswagen’s handling of its Dieselgate scandal will have major political and economic significance in the state.

  • Facts

    Facts

    • VW admitted last September that it had installed software in some 11 million diesel cars worldwide to cheat emissions tests.
    • Profits have plunged at the car maker as it deals with recalls, fines and legal costs in the aftermath of the scandal.
    • In June, VW reached a $10 billion (€9 billion) settlement with customers in the United States, but is yet to agree a deal in Europe.
  • Audio

    Audio

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The frustrations of recent months seemed all-but forgotten when Lower Saxony’s state premier, Stephan Weil, arrived at Volkswagen’s headquarters in Wolfsburg this week.

His visit is not unusual. Lower Saxony holds 20 percent of the company’s shares, giving the top politician in the state a seat on VW’s non-executive supervisory board. The stop is therefore traditionally on the agenda for the state premier’s summer tour of his constituency.

VW Chief Executive Matthias Müller is waiting for him, and greeted the politician with some friendly words: “We want to remain what we have been for Lower Saxony: a driver of innovation, a reliable employer, and the number one economic factor,” he said.

VW employs more than 120,000 people in the state, which means that if the carmaker doesn’t do well, then Lower Saxony doesn’t either.

And at the moment, Volkswagen isn’t doing well at all because of the Dieselgate scandal, the costs of which have reached the double-digit billions.

That means Mr. Weil and Mr. Müller have to walk a delicate balance.

Both men are key players in overcoming the crisis. Mr. Weil sits on VW’s supervisory board as the representative of the state. And since the Dieselgate scandal erupted, he has been meeting with Mr. Müller up to twice a week for what insiders say are often grueling discussions.

“What’s good for VW is also good for Lower Saxony.”

Stephan Weil, State premier, Lower Saxony

Their relationship is sometimes strained since, in addition to his role in maintaining the health of the company as a board member, Mr. Weil must also justify its actions to the public as a politician.

It’s a dilemma that some of the other VW executives don’t understand. When he refused to let company managers off the hook for the scandal at the last annual general meeting for shareholders, for example, they were incensed.

Mr. Weil sees no problem with his double role. “What’s good for VW is also good for Lower Saxony,” he said.

But to voters and VW employees alike, that statement doesn’t justify the controversial decisions by the company, such as granting its managers big bonus payments despite Dieselgate.

Still, the 57-year-old is careful in his criticism of the company. Treading lightly is a skill he learned in his past roles as a prosecutor and judge. He seemed calm as he made the rounds on the factory floor in Wolfsburg, where he openly refers to the company’s manipulation of software in 11 million diesel vehicles to cheat emissions, even calling it “Dieselgate,” a term the company’s management loathes.

Mr. Müller, who took the helm from the now-disgraced Martin Winterkorn last September soon after the scandal, acknowledged Mr. Weil’s mention of the scandal with a grim look. The boss prefers to call it the “emissions issue.”

The visit to VW is the most important stop on Mr. Weil’s summer tour, which has also included refugee centers and research facilities. He’s warming up for upcoming state elections.

VW can’t be allowed to be a problem, even in the event of job cuts at the carmaker. If it comes to that, Mr. Weil said, he’ll have to find a way to explain it to voters in a way that they can understand.

Politicians from other states in Germany have been harder on Volkswagen. Earlier this month, the state of Bavaria announced plans to sue Volkswagen for damages to its state pension funds, which owed VW preference shares that plummeted in value. Markus Söder, the state’s finance minister, said, “We want this money back.” He said Bavaria’s pension fund would file a suit against the carmaker in September.

Bavaria’s move is the first time a regional government in Germany is taking legal action against the carmaker and marks a stronger step by German politicians who have been criticized for their inaction and light touch in the Dieselgate case.

Earlier this year when Germany’s transport minister, Alexander Dobrindt, said he would not fine Volkswagen, consumer groups responded angrily. In Germany, the company is in the middle of fixing the affected vehicles, Mr. Dobrindt argued. Forcing VW to repair the cars was therefore punishment enough.

But as Volkswagen has agreed to pay billions in settlements with authorities and consumers in the United States, the lack of a German fine angered many. Overall in Europe, there has been criticism of the way politicians have handled the crisis as the carmaker has not yet faced penalties nor offered to pay financial damages to consumers, despite calls from some opposition politicians and consumer organizations to do so.

“This is a scandal as well as unlawful,” Berlin-based lawyer Remo Klinger said about Mr. Dobrindt’s decision not to pursue any penalties against VW.

“It is unlawful from a European perspective, because deterrent sanctions should be levied when breaches of law occur. This is not deterring,” Mr. Klinger told Handelsblatt Global Edition in July.

Others have argued that German politicians have failed to crack down on Volkswagen as the auto industry matters to the country so much.

And there have been indications that lawmakers from Germany and the European Union were notified of the emissions manipulation before they were revealed in September 2015.

Recalling a 2010 meeting with Germany’s chancellor Angela Merkel, Mary Nichols, who chairs the California Air Resources Board, said Ms. Merkel took the time to tell her that California’s strict nitrogen oxide limits were damaging German carmakers. Ms. Nichols said later that she was surprised that Ms. Merkel knew in such detail the emission problems German carmakers were having in the state.

Ms. Nichols said later she was surprised at the politicians’ support for the carmakers, rather than the Americans’ environmental laws: “I have never experienced a similar intervention of a politician against our environmental laws, neither before nor since,” Ms. Nichols said in a subsequent interview.

The news magazine Spiegel wrote in July that memos and letters between European Commission representatives showed concern about emissions levels, which remained high in cities despite changed laws – and established new tests to investigate these. While documents suggested that the European Commission knew as early as 2010 that carmakers were manipulating emissions values and notified governments in Europe about this, the German government denied having been informed about any kind of cheat software in 2012, as the article reported.

As investigations continue worldwide into the Dieselgate scandal, more revelations may be yet to come. The question is whether politicians could yet be caught in the crossfire.

 

Martin Murphy specializes in the automotive, defense and steel industries. Allison Williams of Handelsblatt Global Edition contributed to this article. To contact the author: murphy@handelsblatt.com

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