Copyright Adam Berry, Getty Images
Peter Altmaier, German Chancellor Angela Merkel’s economy minister

Germany to Take More Hands-On Approach in Industrial Shift

Feb. 5, 2019
Germany’s more active approach is a response to U.S. President Donald Trump’s America First doctrine and China’s 2025 strategy.

Germany’s Economy Ministry laid out a broad industrial strategy that seeks a more hands-on approach in backing the country’s export champions against Chinese and U.S. competition.

“This is about whether we can maintain and expand the enormous prosperity this country has had for the past 70 years,” Peter Altmaier, Chancellor Angela Merkel’s economy minister and confidante, told reporters in Berlin on Tuesday, presenting the government’s National Industry Strategy 2030.

At stake is how much to use the power of the state to support Germany’s economy through promoting mergers and actively investing in new technology, such as artificial intelligence and battery cells. The approach doesn’t come naturally to German politics, where leaders have in the past relied on the market and independent business decisions, in contrast with France’s more interventionist policy.

The urgency has intensified after Tesla Inc. beat BMW AG, Daimler AG’s Mercedes-Benz and Volkswagen AG with rolling out viable electric cars. That technology shift threatens to undermine Germany’s automotive competitiveness, a key pillar of the country’s economy.

Stumbling Innovation

Saying German innovation stumbled in the past few years, Altmaier set out the government’s industrial strategy over the next decade, which focuses on key areas from energy to e-mobility and seeks to promote European and national mergers.

Germany will go “from a bystander of a process that’s already in full swing in the U.S. and China into a shaper,” Altmaier said, evoking the architect of Germany’s post-World War II economic “miracle,” former Chancellor Ludwig Erhard.

Germany’s more active approach is a response to U.S. President Donald Trump’s America First doctrine and China’s 2025 strategy, which set out a detailed strategy to catch up with global rivals in high-end technology. The German government has become increasingly concerned over the vulnerability of its engineering prowess amid a shift to digital technologies.

Efforts by the German Finance Ministry to explore a merger between the Deutsche Bank AG and Commerzbank AG and a disputed rail merger between Siemens AG in Germany and France’s Alstom SA underscore stepped up efforts to back national or European champions that can hold up as the global economy shifts.

Takeover Controls

In the light of an expected veto of the Siemens-Alstom deal by the European Commission, German and French officials have taken aim at authorities in Brussels for taking a parochial view of the global upheaval and tying Europe’s hands when it comes to competing with China. Merkel’s government also is seeking to strengthen the country’s global competitiveness by tightening controls on foreign investment.

A wake-up call for Germany in rethinking its industry strategy came after the takeover of robot maker Kuka AG by China’s Midea Group Co. in 2016. That led Merkel’s government to review its tools for shielding technology companies and securing German competitiveness. Merkel’s cabinet implemented its new powers in August 2018 by thwarting a Chinese bid for tiny machine-tool manufacturer Leifeld Metal Spinning AG.

By Birgit Jennen and Patrick Donahue

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