FT: German carmakers are off the pace, minister says

Germany's environment minister has criticised the excessive "proximity" between politicians and carmakers and urged the industry to do more to compensate customers and catch up with international rivals after the recent diesel scandal.

Barbara Hendricks said carmakers from Japan, China and the US had moved more swiftly to embrace new technologies such as electric cars and fuel cells.
"The German car industry has been doing research on both but never took a decision to go decisively for one or the other," she said in an interview. "At the end of the day that means that Germany has not set the pace for the global car market. And that is a pity."
Her remarks - ahead of this week's Frankfurt Motor Show - are part of a broader political backlash against a sector that was hailed until recently as a proud symbol of German industrial might but is now embroiled in multiple scandals. The reputation of Volkswagen, in particular, has been battered by the admission that it cheated in emissions tests for its diesel cars.
The broader scandal surrounding excessive emissions of harmful nitrogen oxide has also drawn in carmakers such as BMW and Daimler, which together with Volkswagen, Porsche and Audi are also under investigation for allegedly breaking cartel rules.

Not enough

Ms Hendricks warned that the measures agreed by the car industry in response to the crisis - software fixes for 5.3m cars and incentives for car owners to upgrade to newer models - were not enough. "The car industry refuses to upgrade the car's hardware. I am aware that you cannot do this with every affected model," she said. "[But] wherever possible, carmakers are obliged to offer hardware upgrades."
Auto executives argue that such upgrades, which would typically involve retro-fitting special tanks, would be costly and complex and would divert resources from the development of cleaner models. But Ms Hendricks said: "It is true that the car industry has to invest in the future so they can keep up with the world market but the car industry also has to win back the trust of customers. And don't forget that VW had to pay €22bn in fines in the US and they still made profits of almost €7bn in the first six months of the year."
The minister acknowledged that there had been failings on the side of government as well. "There was too much proximity between the car industry and parts of Germany's political scene. That was never true of the environment ministry, no matter which party was in charge. But the chancellery, the economy ministry and the transport ministry have traditionally been very close to the car industry."
That proximity, she added, had not helped the industry but had stifled innovation.

Environment under scrutiny

Ms Hendricks, a veteran Social Democrat who has held the environment portfolio in the government of Angela Merkel since 2013, has emerged as one of the most vocal critics of the car industry in recent months. With less than two weeks until the German general election her stance has become increasingly mainstream as politicians from across the spectrum try to tap into popular anger with Germany's powerful carmakers.
The diesel scandal is one of several areas where Germany's environmental record is under scrutiny.
Ms Hendricks said the country was on track to lower its CO2 emissions by only 35-38 per cent by 2020, less than the 40 per cent that Berlin is officially committed to. The benchmark comparison is with the year 1990, which means Germany gets credit for the closure of heavily-polluting industrial plants in the formerly communist East Germany.
"We can still meet our climate goals but we need to take additional measures," Ms Hendricks said.
Many activists believe that those additional measures should include shutting down coal-fired plants, which rank as some of the biggest polluters, but which are also linked to mining jobs in some of Germany's poorest regions.
The minister pleaded for patience, saying: "We will end coal-fired power plants at some point after 2040. But I am against saying we have to do this by 2030. This is a process in society where we have to convince people that they and their regions will not be left behind."
On the recent US decision to pull out of the Paris climate accord, Ms Hendricks struck a sanguine note. She noted that the US move had "bound the rest of the world closer together", citing the recent strong endorsement from countries such as India and China for binding climate reduction targets. "I am very optimistic," she said.
Copyright The Financial Times Limited 2017

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