What’s Good for General Motors…

“What’s good for GM is good for America,” is the twisted phrase of Charles E. Wilson, whom Dwight D. Eisenhower nominated as defense secretary in 1953.*

Before that, as you might guess, he’d been general director of General Motors, the largest automobile maker, from its founding in 1908 until its bankruptcy in 2009. This statement is symbolic of the power of corporate America over democratic America and an American export item.

Damaged Reputation

The European Union has taken first place as protector of the environment. The fact that the U.S. Environmental Protection Agency had to point out Volkswagen’s manipulation of carbon dioxide emissions indications is a blow below the belt for the EU. But a well-deserved one.

The European Commission wanted to introduce emissions testing under real conditions in 2007. Lobbying by the automobile industry, however, gained a 10-year postponement. The commission, moreover, left it to national governments to enforce legislation prohibiting the installation of mechanisms that skew emissions test results. National governments more or less ignored it and the commission knew they ignored it.

The Environmental Transport Association claims that the VW case is only the tip of the iceberg and that many other auto manufacturers manipulate tests.** Aside from that, manufacturers, when introducing new models onto the market, look for the national regulator which will make the softest demands. That regulator’s decision is then in force EU-wide. This illustration of regulatory dumping is no exception in other industries, either.

All the same, Brussels will have to react to the revelation of VW’s behavior. Manufacturers are worried its reaction will be exaggerated. The president of the European Automobile Manufacturers’ Association warned against measures that could threaten the competitiveness of European industry. More than 12 million people on the old continent are employed in this sector.

How the Chancellor Lobbied

Volkswagen is Germany’s number one corporation and until recently, every German was proud of it. It was also the first really important foreign investor in Slovakia. Former Premier Vladimír Mečiar’s cabinet issued a “tailor made” executive order giving the investor a 10-year tax vacation. Few people questioned the correctness of this step at that point. Since then, the Slovak Republic has become the largest per capita producer of personal cars. The associated risk should not let us sleep peacefully.

Directly or indirectly, VW provides a seventh of all job opportunities in Germany. If we add other German auto companies, their share of overall employment in the Federal Republic grows even more. It’s therefore not surprising that governments in Berlin guard them like their own lives.

According to The New York Times, in the second half of 2013, Chancellor Angela Merkel successfully pressured Brussels into postponing until 2021 the effective date of certain provisions in the already-reached agreement on CO2 reduction. Merkel lobbied British Prime Minister David Cameron as well. She allegedly also threatened Portugal that if it didn’t support the German position, it would never get even one more auto plant.

Several months before the VW scandal broke, three countries – Germany, Great Britain and France – even demanded that Brussels leave loopholes in the testing procedure due to take effect in 2017, which would mean CO2 emissions up to 14 percent higher than have been officially reported. Doubtless they shielded themselves with the ACEA president’s argument about why it’s necessary to protect this sector.

A Goldman Sachs Cabinet

U.S. administrations from those of Bill Clinton to Barack Obama have earned this nickname. Top representatives of this American financial institution have sat in key posts in each one of them.

Some examples are Robert Rubin, previously co-chair of Goldman Sachs’ board of directors, and Hank Paulson, once the general director of the company; later both became secretaries of the U.S. Department of the Treasury, the former in the Clinton administration, the latter under Obama. There are several others who have worked for Goldman Sachs and are today in prominent positions in the Obama administration.

The relationship between the German government and VW isn’t quite that close. Finance Minister Wolfgang Schäuble has nothing to do with VW. Former two-term Chancellor Gerhard Schröder and current Vice Chancellor Sigmar Gabriel have, as chairs of the provincial government of Lower Saxony, sat on the company’s supervisory board.

This practice is in effect to this day. They’re able to do this by the Volkswagen Law, which reserves a one-fifth interest in the firm for the Lower Saxon government, which has a place on the board of directors and, up until a ban by the European Court of Justice, owned a so-called “golden share” giving it additional rights.

It’s said that there is a revolving door, although on a smaller scale, between the German government and automakers: One person leaves the government to work for an auto company, another goes from firm to government. It’s not just a matter of VW, but also firms like Daimler, etc. If that is so — and the facts confirm it — then it’s still valid to say: “What’s good for GM is good for…” Really?

*Editor’s note: During Wilson’s confirmation hearings, Wilson, a General Motors stockholder, was asked if he could make a decision as Secretary of Defense that would be adverse to GM, and he said he yes, but he couldn’t think of such a situation “because for years I thought what was good for our country was good for General Motors, and vice versa.” This phrase has often been misquoted, and Wilson reportedly accepted the popular version when he retired.

**Editor’s note: The Environmental Transport Association is British road rescue company that aims to raise awareness of transport’s impact on the environment.