With Friends Like These, Who Needs Enemies

I. Six evasive moves

In recent days, Markus Lanz drove the Minister-President of Lower Saxony, Olaf Lies, on live camera into an aporia that, as a snapshot of German industrial policy, accomplishes more than any study. The occasion was the finding that Volkswagen had suddenly become market leader again in China — with cars developed in Hefei, built in Chinese plants, and made for the local market. Lies, since 20 May 2025 a member of the Volkswagen AG supervisory board as representative of the state of Lower Saxony, was meant to explain what this success means for Germany. Beside him sat Jörg Wuttke, longtime president of the EU Chamber of Commerce in Beijing, as well as the journalists Kerstin Münstermann of the Rheinische Post and Frederik Pleitgen of CNN. Münstermann posed, several times, the only question that matters in this situation: What does the German voter get out of this?

Lies answered precisely. He said value creation was migrating to China — planning, development, the whole topic of research, which has now really become basic research. He said taxation was happening there. He said his proposal amounted to localising models developed in China for the European market — bringing final assembly here, with components from China. Münstermann pushed back: So we subsidise carmakers here who develop cars there. She drew the Hungarian parallel — BYD in Hungary, courted by Orbán with tax money; Volkswagen would be playing the same game under reversed signs. The German taxpayer would in the end help finance, through his levies, the loss of his own job.

At this point the meandering set in. Lanz and Münstermann pressed six times with the simple question of whether Germans would have to work more if the location was to be saved. Lies dodged six times. He said we must become more productive. He said we must be more successful. He said we must describe a vision. He said we must want to be successful again. He said we must link arms again. He said we must explain what for. Six sentences that are not an answer. Lanz, who knows the format, commented at one point: You're playing therapist here. Lies laughed. But he did not answer.

This is not incompetence. Olaf Lies is a trained radio electronics technician, studied electrical engineering in Wilhelmshaven, worked two years as a development engineer at the Institute for Technical Scientific Innovation, then at the University of Applied Sciences Oldenburg-Ostfriesland-Wilhelmshaven with focus areas in electrical engineering, photovoltaics, and computer science. He is closer to industrial reality than most German top politicians. His meandering is not ignorance. It is the only possible movement of a man who must simultaneously fulfil two loyalties that are no longer compatible in this situation. As Minister-President he represents the state of Lower Saxony with its roughly 130,000 VW employees at the Wolfsburg site and his voters. As supervisory board member he represents the shareholder interest of a corporation whose strategy is to relocate value creation to wherever it is cheaper. Representing both roles simultaneously means being unable to speak the truth. Lies does what remains: he talks in circles until the next topic comes.

II. Forty years of symbiosis

To understand why Lies finds himself in this position, one must look back forty years. In the 1980s the German automotive industry began a symbiosis with politics that is without equal. Helmut Kohl coined the formula Autoland Deutschland in 1985; it remained in use throughout the Federal Republic. Gerhard Schröder, before his chancellorship Minister-President of Lower Saxony and member of the VW supervisory board, allowed himself to be called Genosse der Bosse by the press and embraced the label openly. Angela Merkel personally intervened in Brussels in 2013 to prevent stricter CO2 limits for German premium manufacturers — an episode dubbed Lex BMW, because it took place immediately after a major donation from Susanne Klatten and Stefan Quandt to the CDU. Olaf Scholz attended shareholder meetings even as Federal Chancellor; his Economics Minister Robert Habeck flew with a corporate delegation to Beijing in 2024.

The revolving door between politics and corporate boards worked in both directions, at a speed that made any compliance rule a farce. Matthias Wissmann, Federal Minister of Transport under Kohl from 1993 to 1998, became president of the German Association of the Automotive Industry in 2007 and remained so until 2018 — eleven years as chief lobbyist of the very branch whose policy he had shaped as minister. Eckart von Klaeden, Minister of State in the Chancellery under Merkel from 2009 to 2013, switched immediately at the end of his term to Daimler AG as chief lobbyist; the federal prosecutor's office investigated for possible acceptance of advantages, the proceedings were dropped. Sigmar Gabriel, until 2017 Vice-Chancellor and Foreign Minister, joined the supervisory board of Deutsche Bank and the advisory board of Siemens Energy. Joschka Fischer, former Green Foreign Minister, advised BMW. Ronald Pofalla, former Head of the Chancellery under Merkel, went to Deutsche Bahn. The list could be continued for every legislative period. It is not a scandal, because it cannot be scandalised — it is the rule.

In this constellation, analytical distance between the state and the corporations disappeared. Industrial policy meant OEM policy. What VW, BMW, Mercedes, Audi and their most important suppliers needed was delivered: tax breaks, research funding, the diesel privilege, the commuter allowance, the scrappage premium, the industrial electricity price, the e-car purchase premium, KfW loans for plant retooling. The corporations in turn delivered what politics needed: jobs, campaign donations, a narrative of German strength with which Federal Chancellors could show themselves in the world. The symbiosis worked as long as the German corporations were economically on top.

How this symbiosis presents itself in daily operation was described by Gabor Steingart in January 2026 in a sentence more revealing than its author realises: The Chancellery has always had an invisible cat flap. Those who know the code get in. Those who have the code are the DAX board chairmen. Their function during these visits, by Steingart's own description, is not to speak uncomfortable truths but to emotionally stabilise the Chancellor. The economic elite as therapeutic intervention; the CEO as comfort cat; the Chancellery as wellness oasis for insecure heads of government. If this description is accurate — and it does not come from a hostile source but from inside the apparatus itself — then the function of these meetings is not consultation but mutual reassurance that everything is in order. This is not symbiosis in the classical sense. This is complicity.

III. What they actually innovated in these decades

The German OEMs were not innovative during this period in the sense the word once carried. They developed no new propulsion forms — when the Tesla wave rolled in from 2008 onwards, they needed a decade to even react programmatically. They produced no fundamentally new materials, built no autonomous battery technology, supported no domestic semiconductor industry, enabled no domestic sensor and lidar production, created no software platform for connected vehicles that could compete with American or Chinese solutions. What they could do was mechanical engineering at the highest level — perfecting existing combustion technology, optimising body panel gaps to thousandths of a millimetre, refining diesel efficiency. It was a culture of incrementalism disguised as high technology.

Where genuine innovation was claimed, fraud was often involved. In September 2015 it came out that Volkswagen had for years installed defeat devices in its diesel engines that produced different readings on the test bench than in road traffic. Eleven million vehicles worldwide were affected. VW had to pay over 25 billion US dollars in fines and compensation in the United States, plus civil proceedings in Germany worth about ten billion euros. Daimler followed with similar findings — 870 million euros in fines in 2019, recall actions for over three million vehicles. BMW was forced by the Federal Motor Transport Authority to retrofit in 2022. What the industry had presented as its innovations of the 2000s was, to no small extent, manipulation-software solutions. They did not change reality. They changed the measurement of reality.

The innovative base that every industrial country rests upon, they did not build but systematically weakened. Over three decades the OEMs constructed a supplier system that forced their own suppliers to assume development costs. Anyone who, as a small or mid-sized innovator, presented a new process technology had to submit it to the OEM for evaluation. The OEM examined, had samples manufactured, often without compensation, and decided. What the OEM needed, it took — at licensing terms that left the inventor a fraction of what direct market exploitation would have yielded. What the OEM did not need stayed with the inventor, who had borne the development costs alone. Over forty years this mechanism thinned out the German inventor base: in 1990 around 25 percent of patent applications came from the layer of independent inventors and small-to-medium enterprises; today less than 4 percent. The OEMs cut off the very sources from which the new emerges. It was short-term profitable and long-term suicidal. Today, with the sources dried up, they must source the new wherever innovation still takes place — and that is no longer Germany.

IV. The great transfer

The market that delivers substance today is China. And to precisely that market the German corporations have transferred, over the last two decades, what others created and they appropriated. Volkswagen has been present in China since 1984, has earned hundreds of billions of euros there over forty years — and in November 2025 opened its first full research and development base outside Germany, the VCTC in Hefei, with development cycles of 24 to 30 months instead of the 48 customary at home. Wuttke described it precisely on the Lanz show: They bought into XPeng, do the chassis with the Chinese, do all the digital solutions with Huawei, with Alibaba, with Baidu — everything Chinese. BMW operates its largest development centre outside Germany in Shanghai. Mercedes CEO Ola Källenius declared publicly in 2024: I am Chinese. Bosch operates 34 plants and 26 technical centres in China, with more than ten thousand R&D employees there. BASF is building a complex in Guangdong for ten billion euros while cutting 2,600 positions in Ludwigshafen. ZF, Continental, Schaeffler follow the same pattern. The data of the German Economic Institute from January 2026 document the magnitude: in 2025, seven billion euros of German direct investment flowed to China, plus another twelve billion from reinvested local profits — the highest sum in five years, an increase of fifty percent over the previous year.

That this process does not remain abstract is shown by a single photograph from 3 March 2026. A conference room in China. Four men at the table, red contract folders, handshake — the strategic cooperation between Schaeffler and the Chinese robotics manufacturer Leju Robotics is being signed. Four men, all four Chinese: Zhendong Ke and Hao Gao from Leju, Haitian Sun and Yilin Zhang from Schaeffler. Two of them are on the payroll of a German corporation headquartered in Herzogenaurach. The press release lists what Schaeffler brings to the partnership — roller bearings, ball screws, precision gears, electric motors, sensors, battery management, metal processing know-how, 3D printing technology: the complete inventory of one hundred years of German precision engineering. What Leju brings, the press release formulates as insights into research and development. Three months earlier, Schaeffler CEO Klaus Rosenfeld had shown the Unitree G1 humanoid robot from China on stage and said: There's really nothing of ours in it. We bought it to understand how it works. Three months later he turned the wanting-to-understand into a contract that gives his own know-how to China — bypassing the German start-up Neura Robotics in Metzingen, which would have sought exactly these components. What is happening here has an official name in Chinese industrial policy: 引进消化吸收再创新 — Introduce, Digest, Absorb, Re-Innovate. It has stood since 2006 in the Medium- and Long-Term Plan for Scientific and Technological Development of the People's Republic. The Germans do not read it. They sign.

The know-how that was transferred over decades was not the corporations'. It is that of a whole industrial history: the know-how of the machine tool manufacturers who once made Germany the workshop of the world and have today either disappeared, been sold abroad, or are fighting for survival; the know-how of the suppliers who have trained generations of engineers; the know-how of the small and medium-sized inventors whose patents the OEMs acquired at corporate terms; the know-how that was financed with German tax money via federal and EU funding programmes, Fraunhofer institutes, universities, and research institutions. All of it migrates. The corporations call it globalisation. It is extraction.

What the corporations did with the profits from this transfer is the second point. They did not reinvest them in building a new industrial base in Germany. A considerable part they distributed internally — via quasi-socialist structures that maintained a wage aristocracy and a bloated administrative apparatus — and extracted via dividends, share buybacks, and special distributions to owners. The Quandt and Klatten families received BMW dividends in the double-digit billions between 2010 and 2024. The Porsche-Piëch family realised similar magnitudes through the VW share split in 2022 and the subsequent special payments. Share buybacks of the German DAX corporations between 2010 and 2020 totalled over 80 billion euros — money that did not flow into research, not into building new business fields, not into securing the location, but into the cosmetic improvement of share prices. Today, with international competition having overtaken the corporations, they stand without reserves and reach for state support. The privatisation of profits and the socialisation of risks is the business model.

V. The end phase

Lies' proposal on Lanz was to localise models developed in China for Europe. The word sounds harmless but describes the endpoint of a movement that has been running for forty years. Localising means: final assembly in Wolfsburg, components from China, software from China, research from China, margin back to Wolfsburg, label Made in Germany on the boot lid. It means preserving the German plants as assembly halls for products developed elsewhere. It means the final concentration of industrial substance at a location that is not Germany.

Münstermann's honest question — what does the German voter get out of this? — Lies cannot answer, because the honest answer would have to be: nothing. If value creation takes place in China, the taxes flow there. If research takes place in China, the engineers are trained there, not here. If the suppliers become Chinese — as Wuttke formulated it on Lanz: Bosch and ZF and Continental, you have to become more Chinese — then the jobs on which the middle class rests disappear here. The localisation Lies envisions would not stop this process but slow it. It would keep Wolfsburg viable for another ten or fifteen years, with ever fewer employees, ever thinner margins, ever less substance. That is the end phase. Lies knows it. Wuttke knows it. Münstermann knows it. Lanz knows it. Pleitgen knows it. But none of them can say it in those words without taking themselves out of the game.

Wuttke's remark on Lanz that one must be almost grateful to Trump, because his policies discourage Chinese top talent from going to the United States and Germany could profit from that — this remark is the most unvarnished diagnosis of the evening. It says: The only hope of German industry lies in the failure of American competition at recruiting Chinese engineers. That is the position of a former industrial great power that no longer trains the talents it needs itself, and that hopes others will do even worse than it does. It is not the cynicism of an individual. It is the sober statement of a man who has spent over twenty years in Beijing and knows the situation from both sides.

VI. With friends like these

For forty years German politics treated the OEMs as friends — as national champions, as employment guarantors, as the narrative of German industrial greatness. It gave them everything they demanded: tax breaks, funding, location subsidies, regulatory consideration, lobby access without barriers, a revolving door between board floors and ministries. The OEMs in return delivered what politics needed: a narrative. An employment statistic. Campaign donations. Glamour on international stages. In the last two decades these same corporations have systematically cheated, relocated their research abroad, thinned out the inventor base in their own country, and privatised the profits of this transfer. Today, in the end phase, they return to the German taxpayer — through e-car premiums, through the request for localisation, through state-subsidised battery plants in Salzgitter — and finance with German money the last step of relocation.

With friends like these, who needs enemies. No Chinese competitor could have destroyed German industrial substance as effectively as the German OEMs themselves. No foreign competitor has bled the German Mittelstand so precisely. No foreign actor has methodically dismantled the German inventor layer. It was the domestic champions, with the friendliest smile and the best political connections, who deprived the country of its industrial future — and it is Olaf Lies, a Minister-President and supervisory board member in double function, who is trying on Markus Lanz to present this balance sheet as if it amounted to a strategy.

What he cannot pronounce is the second half of the proverb. If the friends are such, only one question remains: what does one do with them? As long as politics does not dare to answer this, the end phase continues — quietly, with localisation, with supervisory boards that meander, with therapist-speak instead of industrial policy. Until there is nothing left to localise.