VW Scandal: Time for German Industry to Abandon Its Arrogance

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http://www.spiegel.de/international/business/vw-scandal-shows-german-companies-are-no-longer-big-league-a-1055098.html



Arrogance and complacency are widespread in Germany industry, with Volkswagen becoming just the most recent example. For the German economy to remain healthy, fundamental changes are necessary.

VW Scandal: Time for German Industry to Abandon Its Arrogance
A Commentary by Armin Mahler
September 30, 2015 – 12:01 PM

The best commentary on the Volkswagen scandal came courtesy of former CEO Martin Winterkorn himself, well before he resigned last week. "Arrogance and complacency are the worst things that could happen to us," he said. The quote does not come from in his recent video message, where he attempted to apologize for the company's self-destruction. Rather, it is from an interview with SPIEGEL that took place exactly a year ago. And he meant it merely as a description of a hypothetical danger. He didn't yet realize that the worst had already long since happened.

A belief in their own invincibility is widespread among Germany's captains of industry. When it comes to reaching the goals they've set for themselves, they will resort to any means necessary. In the case of Volkswagen, it was undone by its desire to outstrip Toyota as the world's biggest carmaker. In the case of Deutsche Bank, it was its all-consuming aim to achieve a 25 percent return on equity. The pursuit of this goal made it guilty of almost every one of those financial-sector transgressions that ultimately led to the crisis. In the aftermath, the bank sought to fundamentally change its company culture, a shift that failed badly. Today, Deutsche Bank is but a shadow of its former self.

Volkswagen is now facing a similar fate -- a heavy blow for the entire German economy, and one it will need time to recover from. In recent years, largely unnoticed by the public, German industry has already lost much of its shine and few major companies are still playing in the big leagues. Lufthansa is struggling to withstand the onslaught of budget airlines, while energy giants E.on and RWE are fighting for their very survival.

Each case is different, but there are some similarities -- such as an inability to adapt to changing conditions and an ignorance of political and social currents. RWE and E.on refused to accept the dwindling public support for nuclear energy and invested too little in renewables, pinning their hopes instead on political support. Volkswagen responded to stricter emissions standards by cheating on tests instead of developing low-emission engines. In addition, industry lobbyists made sure that legal requirements were not too tough.