VW scandal exposes cozy ties with Berlin

By Money Times

Sep 28, 2015 10:49 PM EDT

The recent scandal that Germany faces has revealed the loose sanctions that its government has for the German automobile industry, what with the latter being the nation's poster child with its combined contribution of 413 billion euros revenue from the three biggest carmakers: Volkswagen, BMW, and Daimler in 2014 alone. Whether it is justifiable or not has raised a moral issue argued upon these days with "just how many lives have perished because of this?" as the primary argument.

According to Reuters, the reason why Berlin largely supports the automobile industry is because it employs 750,000 people in Germany. Other than that, in 2014 it has contributed revenue that was bigger than that country's federal budget, which is only at 300 billion euros.

Not only does this create a cozy relationship between the government and the industry, it also revealed that individuals who are in Germany's highest political positions these days have been large supporters of the industry. The political ties are very strong at Volkswagen in particular. Proof of this is the 1960's Volkswagen Law, which at the European level has faced repeated legal challenges. What it does is shield the company from takeovers and gives influence on Lower Saxony, which owns 20 percent stake in VW. In a way the state also has become the stepping stone to national power for countless politicians.

Now, The Wall Street Journal has reported that after VW disclosed to the world last week about the software it uses to cheat on the emission tests, the company finally faces higher financing costs and weakened ability to offer loans in order to boost sales. The scandal is simply rippling through all aspects of the company's business. Some argue this is not enough.

An editorial published on The Guardian urges to punish the guilty as it's a very serious crisis. To think that its former chief executive could be sitting in a fat, comfortable €28m pension when he resigned after the scandal is too repulsive.

"Until now the German auto industry has been handled with kid gloves by the politicians," said the head of the Federation of German Consumer Organisations, Klaus Mueller.

"Emissions targets were set at less than ambitious levels and agreement on new testing rules was delayed. Even worse, there was no mechanism for overseeing whether legal emissions limits were being met, at the cost of the environment and the consumer, as the VW case has now shown."

It is a big fraud and consumers bought it as they were confident with how the unscrupulous marketers have steered them to "going green."

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