“What really shocked us, even looking back, is the approach of the German government that followed one simple rule: If France, the U.K. and EADS management like it, then there has to be something wrong with it,” says one executive who participated in the negotiations. “But what does that tell us about European unity?” Merkel studied Russian in school and she admires the U.S. (She was one of the very few European politicians with a close relationship to then-U.S. President George W. Bush.) But France? That's a different story. Because Merkel mistrusts France, she could not allow the merger, and she believes Germany needs to own as many shares in EADS as France.
It was not Merkel alone who formed the government's aerospace policy, of course. For the details, she relied on an old ally, Peter Hintze, whom she hired as state secretary in the ministry of youth and women in 1991. Today, Hintze is the deputy economics minister, with the additional title of aerospace coordinator. Hintze was against the merger, in favor of government intervention all along.
After Enders's missed trip to China in August and his brief chat with Merkel on the phone, he never really heard back. One Enders aide says the company offered further explanations and proposed meetings numerous times only to hear that Merkel's schedule did not permit additional discussion.
In September, the merger story leaked and it was all over the news. Things were about to go terribly wrong from the industry's perspective, and everyone on the inside of the deal knew it.
“That leak was catastrophic,” says one industry official, because it put pressure of all sorts on all sides. The parties had agreed on what they would say publicly in case information about the plans became known prematurely. And so the official German government spokespersons said the two companies and the governments were in a “constructive dialog,” with an open outcome. However, on the same day, several German newspapers quoted an anonymous government source as saying there were serious concerns and approval was unlikely. Most observers are certain that source was Hintze, Merkel's top aide.
Officially, the process continued normally. An inter-ministerial working group was set up to look at the various possible implications—but Hintze never attended its meetings. The government ministries sent different people all the time, citing vacations and illnesses. But there was never an official indication that “no“ would be the answer to the proposed merger until almost the very end. Says one senior executive, “It would have been much more honest to simply say 'no' right from the start.”
By not allowing the merger, the German government not only missed what many regarded as a great opportunity for European aerospace, one that one industry official lamented “will never come back.” It also inflicted a wound to Enders that well might have led to his resignation, if EADS were a more ordinary company.
Enders has been fighting hard against the sort of government influence that prevented the merger since he took on his current job. The irony is that the same outlook on the part of Merkel that nixed the deal may have kept Enders in his job. A resignation would have led to a fundamental EADS leadership crisis that would have been difficult for all parties to handle.
Merkel's intervention marks a turn in economic policy and a departure from the previous laissez-faire attitude. Only a few years ago, it would have been unthinkable for the German government to block a merger for the reasons that were key in this case and subsequently buy a significant minority stake in a large corporation. Major concerns such as the postal service or former national carrier Lufthansa were privatized more than a decade earlier and keeping the state out of business seemed like a good strategy that large parts of the political spectrum could agree on, even the German left. It also seemed acceptable that France has owned a stake in EADS since the company's inception in 2000 and Germany did not.