Discover more from The German Review
The phantom pains of Saxony
This newsletter is a 3-minute read
Auto Union - an industrial champion of the past © CC BY 2.0
The ambitious merger of four companies spawned an industrial champion. The car company’s premium brand soon dominated the domestic luxury car market with a whopping 50 percent market share, while its booming motorcycle division was the largest in the world.
Almost ninety years on, few people remember Auto-Union - the Volkswagen Group of its time. And Chemnitz, where the company was based, is now better known for rock-bottom rents and a vibrant neo-Nazi scene than for its heritage as an automotive hub.
The story of Auto-Union is exemplary of the decline of eastern Germany.
Before the Second World War, more than half of Germany’s 100 largest companies were oriental of the Elbe. Berlin was home to industrial giants such as Siemens and AEG; Saxony was the Bavaria of its day - the nation’s industrial powerhouse.
Today only one east German company is among the country’s 100 largest: VNG-Verbundnetz Gas AG in Leipzig.
A Plattenbau and an allotment garden in Chemnitz © imago images / Michael Trammer
What happened to Auto-Union? After the Allied air strikes, the little machinery that was left at the one-time automotive giant was plundered by the Soviet Union as war reparations. The company ceased to exist entirely in 1948 when it was erased from the commercial register of what was to become the German Democratic Republic.
Had it not been for the entrepreneurial spirit of Hans Migotsch, who fled to the West with other key employees, Audi would never have existed.
While Audi still operates with Auto-Union’s original logo (the four rings represent the brands DKW, Horch, Wanderer and Audi), the company is firmly rooted in the Bavarian town of Ingolstadt, where it was rebuilt. In Chemnitz, not a trace of that proud history remains.
"Almost a quarter of the German car production before the war came from Saxony [ … ] Not only the machines left the country. With the many brilliant minds that left for the West, so did the skills and the knowledge,” said former Saxon state leader Georg Hermann Milbradt in 2004.
Mr. Migotsch and his colleagues were not the only ones who fled. After the GDR was sucked into the Soviet Union’s realm, some 20,000 private enterprises are estimated to have left Saxony for the Bundesrepublik in the west.
In the GDR, a forty-year long experiment in planned economy ensued and the remnants of East German industry were reorganized into 12,000 Volkseigene Betriebe.
The last act of the failed experiment was to merge these 12,000 enterprises - everything from movie studios and bakeries to farms, powerplants and the assets of the Stasi - into one.
The Anstalt zur treuhänderischen Verwaltung des Volkseigentum was the largest industrial holding in the world and was in 1990 tasked with the yard sale of the century - selling off the assets of the GDR.
When the Treuhandanstalt was done four years later, the “blühende Landschaften” promised by Helmut Kohl were nowhere to be seen - instead the rubble of 6,000 company liquidations and four million job losses was all that remained.
The former citizens of the GDR took their outrage and disappointment to the streets.
Workers protesting against the Treuhand, Chemnitz, April 1993 © imago images / HärtelPRESS
And as the reunited Germany this October celebrates its 30th birthday the debate over whether more could have been done to salvage the jobs and the GDR’s industrial assets goes on.
“The politics of the Treuhand were the biggest mistake of the reunification,” said Dietmar Bartsch, chairman of die Linke in an interview last week.
While some might argue that there was precious little left for the Treuhand to save, in previously wealthy Saxony, a proud self-perception nonetheless rubbed up against hard economic realities in the 1990s and 2000s.
The successes of the far-right AfD, which gained almost a third of the vote in the last election in Germany’s easternmost state, has little to do with immigration - it’s a big middle finger to the West for their alleged betrayal of the reunification.
Even mainstream politicians such as Saxony’s former minister for integration, Petra Köpping of the SPD have demanded a full inquiry into “what happened in the years after die Wende” and of the alleged corruption and mismanagement of die Treuhand.
But what no inquiry in the world will change is the fact that the economic differences between East and West were created as the two Germany’s went different ways after the war and that these differences will unfortunately persist for generations to come.
Saxony's minister-president Michael Kretschmer loves to boast about the startup scene in his state. Yet the robotics - and semiconductor companies of Chemnitz, Leipzig and Dresden will never be the job boosters that the manufacturing giants of the Wirtschaftswunder, which created such wealth in Germany’s southwest, once were.
Regardless of how successful they might become, the lean and capital efficient companies of 2020, such as Chemnitz poster child Staffbase, will not create hundreds of thousands of employment opportunities such as happened with the Bosches or Audis of the past.
What’s more, most profits of such companies wander off to where the investors and owners are located - as in the case of Saxony’s largest company VNG-Verbundnetz Gas AG. It’s owned by EnBW… a company based in Karlsruhe, Baden Württemberg.
Get the best insights on Germany straight into your inbox. Sign up here:
Who we are:
Jörg Luyken: Journalist based in Berlin since 2014. His work has been published by German and English outlets including der Spiegel, die Welt, the Daily Telegraph and the Times. Formerly in the Middle East.
Axel Bard Bringéus: Started his career as a journalist for the leading Swedish daily Svenska Dagbladet and has spent the last decade in senior roles at Spotify and as a venture capital investor. In Berlin since 2011.
If this newsletter has been forwarded to you and you wish to subscribe, click here: