Volkswagen: One crisis after another for global capitalism

by Richard Mellor

Afscme Local 444, retired.

GM is barely out of the rough after a decade old covering up of defects in its autos that led to the deaths of some 100 people, and suddenly the German bombshell hits us.  Volkswagen AG, the maker of fuel efficient, clean and quiet diesel engine cars is being investigated by regulators in the US and numerous other countries as to whether the company  “purposefully” installed software in its Audi and VW vehicles’ engines that cheated emission tests.

The US EPA and the California Air Resources Board (CARB) have accused Volkswagen of doing just that.  The accusation stems from research done in 2014 that found the software masked N0x emissions during testing and that under real driving conditions emissions were five to 35 times higher. “In other words, the cars are electronically programmed to produce compliant emissions results only during government testing.”, the Wall Street Journal writes in today’s editorial. Using methods to undermine such tests are not new. GM was fined $43 million for using these methods 20 years ago and numerous US truck manufacturers settled similar charges with the US government for $1 billion in 1998.

V.W. CEO Martin Winterkorn has resigned saying that “I am stunned that misconduct on such a scale was possible in the Volkswagen Group”.   The VW executive of the supervisory board that governs VW has stated publicly that Winterkorn had “No knowledge of manipulation of the emissions data.”

This is a crisis of unprecedented proportions for the German Auto industry. The company is expected to recall 11 million cars and has set aside $7.3 billion to deal with the crisis. It has been suggested that costs could rise as high as $18 billion when EPA fines, are levied. Lawsuits and also class action suits by purchasers of the autos are included. “The damage done cannot be measured” one VW board member announced to the press. (Business Week: 9-28-15).  The company’s stock has fallen 30% since the news and owners of affected autos have seen their resale price fall by 20%. This writer owns a 2013 model.

Volkswagen AG is Germany’s largest company and one of the world’s leading auto manufacturers. It employs 600,000 workers worldwide and 300,000 in Germany at 29 plants------one in seven German jobs are linked to the auto industry. The German bourgeois would not bail out the “profligate” Greeks but their own businesses are a different matter.

VW is 51% owned by the Porsche and Piech families. Wolfgang Porsche, whose grandfather invented the Beetle sits on a five-person sub-committee of the supervisory board.  But there is another interesting aspect of this corporation’s governance and that is the relationship the company has with the German state of Lower Saxony and the trade union leadership. Volkswagen employs 72,000 workers in Lower Saxony. 

Source: Wall Street Journal

Through what Bloomberg Business Week refers to as a “Golden share”, the state of Saxony also owns 20% of VW.   This term describes a controversial law that goes under different names in various EU states, and that describes an ownership stake in a company that gives a government “be it national or local---special powers above any other shareholder.”  It actually has veto power. It is also interesting to note that the UK owned Volkswagen at one point as it occupied Lower Saxony after WW11. 
There is more detail on this in BW’s latest issue.  (9-28 to 10-04)

What this relationship amounts to really is the Team Concept in action at the national and international level.  I have only surface knowledge of the situation but it seems clear that the section of the German capitalist class that governs Lower Saxony, in collaboration with the trade union leadership have an arrangement that amounts to the union hierarchy providing votes for the politicians in return for well paying union jobs remaining in the area.  “The close relationship between two of the company’s power blocs----Lower Saxony and the labor unions-----has kept wages high and put upward pressure on pay at the county’s other car manufacturers.” Says Werner Eichorn, a German labor expert.

These measures are no doubt sold as a good deal for German workers but the “Golden share” is in actuality a protectionist measure enacted to defend German capitalists, in this case auto manufacturers, from their global competitors.  And the partnership between what the capitalist press refers to as “the state” and labor, is in reality an agreement between German capitalism and labor as the state, national or local has class content, it is a capitalist state .  It is not beneficial to the German autoworker in the long run as events reveal.  Security for German workers in Lower Saxony or Germany as a whole, can only be guaranteed by building links with workers internationally through a global organization of workers in that industry linked in turn to a global united working class movement.

I was in discussion with comrades today about the potential fallout from this. There is first of all the global reputation that German engineering and know how has been severely damaged. German autos are trusted.  The German bourgeois have also emerged from a successful and humiliating “ass whipping “ of the Greek workers.  Feeling very confident, one wonders what this will do to German capitalism’s dominant position in Europe and the economy as the continent’s number one player.  What, if any might the crisis do to the relationship between German and French capitalism? Will this weaken the ability of the German bourgeois to impose its will on what it deems recalcitrant EU member states?

There is another issue that comes to mind and that is the recent influx of immigrants from Syria and the Middle East. I was reading yesterday that there was hope that immigrants will help alleviate a German labor shortage. I am certain union jobs in auto are not what the German bourgeois had in mind but what if any affect will this have in this area?

There is another aspect to this that we cannot ignore and that is on the mind of many Germans I would think and that is global politics, economics and industrial espionage. I wrote in an earlier commentary about the concern more Germans are having with US capitalism’s meddling in Europe. This is not just workers, but also German capitalists. I quoted one German manufacturer whose company had business relations with Russia claiming in relation to US provocation with regards to Russia that the US is “merciless” when its economic interests are threatened. But it is not US cities that are threatened or U.S. lives lost and businesses ruined in a confrontation with Putin and co.

A recent study revealed that the actions of NATO, including those aimed at increasing tensions in relations with Russia, are being criticized by 68% of Germans, with 32% in support of NATO's actions, including its efforts to contain Russia.

VW is a competitor of the US auto industry in China, Brazil and throughout the world.  The research that led to this investigation by the US government came out of a joint project between West Virginia University and an environmental non-profit, International Council on Clean Transportation. There will be questions and some Germans are saying VW is being singled out by the US; “It’s no coincidence that this discussion comes up now. Economic interests in the U.S. are also playing a role here.”.  Oliver Wittke, a conservative German lawmaker, tells the Wall Street Journal.  That the US government security apparatus has been caught spying on German business and political figures including listening in on Chancellor Angela Merkel’s conversations, has not helped the relationship between the two regimes.

Ongoing Crises

But it’s one crisis after another for global capitalism. Every week it’s something new. We have had the shutting down of the US stock market for a period in the aftermath of the Chinese events, the currency devaluation and slowing of the economy. No one would have predicted the massive refugee wave that hit Europe as Syrian’s Afghans and other Middle Easterners were fleeing US bombings and Washington’s catastrophic foreign policy in the region.  The response from the European working class was also completely unexpected as millions stepped forward to help them.  This was the working class itself coming on the scene, not the product of a leadership steeped in internationalism.

It was a matter of time but Russia has finally entered the Syrian crisis in a more forceful way with troops and military equipment. There is a large Muslim population in Russia and Syria is a close neighbor. Putin would no doubt prefer a secular Assad to the Islamic State next door. It should not be forgotten that in the Afghan war it was the old Soviet Regime that fought the Islamic extremists and the US that armed them.  US labor and the workers movement should have given critical support to the pro-Soviet Najibullah regime but the US trade union leaders give complete support to US foreign policy and opted for supporting and arming bin Laden and his ilk instead.

Anyone suggesting Jeremey Corbyn would be elected to the leadership of the British Labor Party only a few months before would have been laughed off the stage. The love affair with Trump here in the US is coming to an end and the liberal Democrat Sanders is still threatening Hilary who may only be saved by the Super delegate power in the party. Despite the rise of the Corbyn’s and Sanders’ we must recognize the volatility of the global situation that the right wing and fascistic elements can have their day too.

What affect the VW crisis will have on the German working class and already volatile world events remains to be seen but we know one thing for certain. It’s not the last crisis by any means.