The downfall of 3 iconic German companies is nothing short of stunning

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At Harvard’s 368th Commencement this past Thursday, German Chancellor Angela Merkel spoke of her life experiences growing up during the Cold War in post World War II Europe.

On this cool and overcast day, she also gave advice to the graduates on how to live their lives. She obliquely mentioned the trade war and indirectly criticized President Donald Trump — which got a round of applause. She even quoted the German poet, Hermann Hesse, saying “in all beginnings dwells a magic force for guarding us and helping us to live.”

There was one topic, however, that Merkel didn’t broach, perhaps not surprising given the celebratory nature of the day. Merkel made no mention of the economic dysfunction and even decay that seems to be infecting Germany — particularly when it comes to Germany’s largest and most prominent companies. The simultaneous decline of Volkswagen, Deutsche Bank (DB), and Bayer has been nothing short of stunning. It raises the question as to whether it is merely coincidence, or if there is a larger systemic issue in play. Either way, something is rotten in the state of Germany.

German Chancellor Angela Merkel delivers the keynote speech at Harvard's 368th commencement ceremony at Harvard University in Cambridge, Massachusetts, on May 30, 2019. (Photo by Allison Dinner / AFP)        (Photo credit should read ALLISON DINNER/AFP/Getty Images)
German Chancellor Angela Merkel delivers the keynote speech at Harvard's 368th commencement ceremony at Harvard University in Cambridge, Massachusetts, on May 30, 2019. Photo credit: ALLISON DINNER/AFP/Getty Images

Before we take a look at these companies, it makes sense to understand the backdrop in Germany and Europe because of course there’s a lot going on. First regarding Merkel, after leading Germany since 2005, she will step down by 2021 at the latest. She’s faced criticism from the left and right over her immigration policies, while guiding Germany’s tricky position as the leading economy of Europe at a time when forces are seeking to tear the European Union apart.

German GDP growth can be described as adequate, which is to say more or less matching that of the U.S.’s during her tenure, and stronger certainly than most other nations’ in Europe. Speaking of Europe, elections to the European Parliament last week, showed voter fragmentation, decreasing support for center parties and increased strength by both left and right wing candidates. And of course there is Trump and his ever-present threat of imposing tariffs on the EU, which could hit German automakers particularly hard. It has been reported that talks between European and U.S. negotiators are not going well.

The downfall of Germany’s mega-bank

That’s a complicated and fraught environment, but what’s so astonishing is that for the most part, none of these aforementioned problems have anything to do with the decline of Volkswagen, Deutsche Bank, and Bayer. The deep wounds these companies are suffering from are almost entirely self-inflicted.

Let’s go through them starting with Deutsche Bank. It’s difficult to overstate how central a role Deutsche Bank has in the German economy. It would be like if you wrapped up Bank of America, JPMorgan Chase, Citi, and Wells Fargo and combined them into one institution. Besides being the biggest bank in the country with thousands of branches and tens of thousands of employees, it has held huge stakes in most of the biggest companies in Germany — a quarter to a third of Daimler shares, for instance. The bank's senior managers and directors also sat on the boards of 400 companies around the country.