Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Angela Merkel's Leadership Style Shaped Germany's Auto Industry
Transcript
- Lucas: So, Angela Merkel steps down as chancellor in 2021 after sixteen years, but her influence on German industry, especially autos, is still shaping decisions today. And I think her leadership style is one of the most misunderstood in modern business. Luna: Misunderstood how? Most people just remember her as the 'Mutti' figure, calm and steady. Lucas: Right, but that's exactly the point. Underneath that calm exterior was a methodical, data-driven approach that had huge consequences for companies like Volkswagen, BMW, and Mercedes. Take the diesel emissions scandal in 2015. Most leaders would have gone on the offensive, but Merkel did something different. Luna: What did she do? Lucas: She pushed for a national investigation, but more importantly, she didn't publicly condemn the industry. Instead, she used her science background to frame the issue as a technical problem to be solved. That allowed the government and automakers to work together on fixes, rather than turning it into a battle. Luna: So she prioritized the industry's survival over public outrage? Lucas: Exactly. And it worked, at least in the short term. But the long-term cost was that Germany fell behind in electric vehicles. That's the paradox of Merkel's consensus style. It kept the peace, but it also slowed down necessary disruption. Luna: Interesting. So her strength became a weakness in the face of Tesla's rise. Lucas: Precisely. Tesla's direct to consumer model and over-the-air updates were fundamentally different. Merkel's response was to push a 'national platform' for electric mobility in 2016, with a few billion in incentives and charging infrastructure. But it was too little, too late compared to what China was doing. Luna: China's EV market was exploding with subsidies and homegrown champions like BYD. Lucas: Right. And Merkel's approach was to try to encourage German automakers to adapt, but she never forced them. She believed in dialogue. She brought executives to the chancellery, had regular 'auto summits,' and created a sense of shared responsibility. But without a hard deadline, companies like VW kept hedging on EVs. Luna: So was there any point where she made a really decisive move? Lucas: Yes, actually. In 2020, during the pandemic, she used the stimulus package to tie direct consumer subsidies for electric vehicles to a 'bonus' of up to nine thousand euros, but it was designed to phase out over time. That was clever. It created a surge in EV sales in 2021 and 2022, but it also meant the market would drop off once the subsidies ended. Luna: And that's exactly what happened. EV sales in Germany fell sharply after the bonus was cut in 2023. Lucas: So Merkel's leadership offers a lesson: consensus is great, but sometimes you need to impose a clear direction. She was a master at managing stakeholders, but she wasn't a transformer. She preferred to nudge rather than push. Luna: And that might be fine for a stable economy, but not for a disruptor. Lucas: And that's the core of this episode. We're looking at how Merkel's style shaped the auto industry, and what CEOs can learn from both her successes and her blind spots. Luna: Alright, let's dig into those specifics. Lucas: First, her science background. Merkel is a quantum chemist, and it shows. She wanted data before making decisions. During the diesel scandal, she authorized a 'diesel summit' with the industry in 2017, where they focused on technical retrofits and emissions software updates, rather than immediate bans. Luna: So she treated it like a scientific problem, not a political one. Lucas: Exactly. And that approach preserved jobs at a time when the industry was vital to the German economy. But it also meant that VW was only fined a billion euros in Germany, which was a fraction of the billions paid in the U.S. Luna: So were German regulators too lenient? Lucas: Maybe. But Merkel's priority was to protect the industry and its workers. She saw herself as a steward of the German economic model, which relies on high-end manufacturing and exports. The problem is that this model came under threat from cheaper, more innovative competitors. Luna: Her approach was very different from, say, how Jacinda Ardern handled the Christchurch shooting. That was a crisis requiring moral clarity, while this was more about technical and economic pragmatism. Lucas: Good comparison. Ardern had to make a decisive moral statement. Merkel had to balance multiple interests. And that's typical of her leadership. She was often criticized for being too slow, but she was consistent in seeking compromise. That worked well in the Eurozone crisis of 2010 to 2015, where she kept the EU together through tough negotiations. Luna: So she used the same playbook with the auto industry. Lucas: Exactly. She built coalitions, she made sure everyone's voice was heard, and she preferred incremental steps. But that approach has a blind spot: it can't handle exponential change. When the shift to EVs started accelerating, Germany was caught flat-footed. Luna: And what about her relationship with Elon Musk? There was that weird moment when she let him build a Gigafactory in Brandenburg. Lucas: Right, she actually welcomed Tesla's entry into Germany. She saw it as a way to force domestic automakers to step up. In 2019, she said, 'We should welcome the fact that Tesla is building here.' That was a bold move. But it also showed her hands-off approach. She didn't try to shape the conditions for the factory's success; she just let it happen. Luna: And Tesla did succeed, but German automakers still lag behind in software and battery tech. Lucas: Which brings us to a key lesson for CEOs: you need to be willing to say 'this is the future, and we're all in.' Merkel never said that about EVs. She said 'we need to be part of it,' but she didn't commit the whole nation to that path. Luna: So it's about knowing when to use consensus and when to be directive. Lucas: And that's the takeaway for our listeners. Many leaders face this exact dilemma: do you involve everyone in the decision, or do you just make the call? Merkel's example shows that consensus is powerful, but it can also be a way to avoid tough choices. Luna: I think there's a lesson here about listening to your stakeholders, but also knowing when to overrule them. Lucas: Absolutely. And that's why we're doing this episode. We want to give you a framework to think about your own leadership style. Are you a consensus builder or a decisive transformer? And which one does your current situation require? Luna: It's a great question. And, you know, this is one of those conversations that makes you think about the choices we make every day. It's the kind of content we love to bring you on this show, and we're glad you're listening. Lucas: It's a natural point to say that this is a conversation we want to keep ad-free. We, the makers of this podcast, believe that the content should speak for itself. If it's added value to your work or your thinking, and you want to support that, the link is buy me a coffee dot com slash fexingo. Luna: We appreciate that, and we know our listeners do too. It keeps things simple and focused. Now, back to Merkel. Let's talk about her legacy in the broader context of German industry. Lucas: Right. So beyond autos, she also pushed for renewable energy with the Energiewende, or energy transition, but she shut down nuclear plants after Fukushima. That was a decision that had massive implications for auto manufacturers, because they use a lot of electricity in production. And it also affected the grid stability for EV charging. Luna: So her energy policy was a mix of boldness and caution. Lucas: Exactly. She made one bold move—the nuclear phase-out—but she was less bold in building new renewable capacity, especially wind. That created a mismatch between the supply and demand for clean energy, which is a problem for EVs if they're charged with coal power. Luna: So in the end, her legacy is a mixed bag for the auto industry. Lucas: I'd say so. She kept the industry afloat during a crisis, but she also let it stagnate when it needed to transform. The real lesson is that leaders in stable times should cultivate a sense of urgency. Merkel was known for her calm, but sometimes you need a little urgency to drive change. Luna: And that's a challenge for any CEO who's running a successful company. How do you create that urgency without scaring everyone? Lucas: That's the question for you to take away. If you're in a leadership position, ask yourself: are you building consensus in order to move forward, or are you using consensus as a reason to stay put? For Merkel, the answer was often the latter, especially in her later years. And that's a cautionary tale for all of us. Luna: Thanks for joining us for this episode of The CEO Diary. We'll be back with another story of leadership and decision-making. Until then, keep thinking about what kind of leader you want to be.