Oklahoma Thunder, the Team Fracking Built

♠ Posted by Emmanuel in , at 5/25/2016 05:39:00 PM
It is with some sadness that Aubrey McClendon--the man who brought the Oklahoma Thunder to Oklahoma City--formerly the NBA title-winning Seattle SuperSonics--passed away under still-unexplained circumstances in March. At that time, of course, oil prices were still rather depressed, and he was also facing a federal antitrust indictment besides. Still, McClendon was instrumental to bringing the Thunder who appear NBA Finals-bound once more to Oklahoma, and of course funding the buildup of a very strong team. Even know, it remains the team fracking built:
McClendon is credited and sometimes cursed for championing the drilling technique known as hydraulic fracturing, or fracking. The technology led to a boom in U.S. oil and natural gas production from porous rock formations, known as shale, that had been hard to tap. And fracking made him a billionaire. By 2005, Chesapeake was the second-largest U.S. natural gas producer, after Exxon Mobil.McClendon had a deep impact on Oklahoma City in the years he ran Chesapeake...
He created tens of thousands of jobs and showered tens of millions of Chesapeake’s and his own dollars on the community. He helped bring the NBA’s Oklahoma City Thunder and an Olympic-class rowing venue to town. He secured the city’s first Whole Foods Market, brought upscale shopping and dining to the Chesapeake neighborhood and contributed to many charities, from local elementary schools to Boy & Girls Clubs. 
In fact, his death came almost immediately after attending the game wherein Stephen Curry sank THAT 3-pointer from nearly half-court:
Good news, though, was scarce for McClendon everywhere he went, even an outing on Saturday night to watch a Thunder game, the basketball team he partially owned and helped bring to Oklahoma City from Seattle. Wearing a blue-shirt, sleeves rolled-up, he took his usual front-row seat on the baseline near the Thunder bench.

What looked to be a brief respite from his business woes turned into a heart-breaker. McClendon could only stand with his hands at his sides as Golden State Warriors’ star Steph Curry sank a last-second three-pointer to hand the Thunder an overtime loss. McClendon left the same way he always did, walking through the private back corridor of Chesapeake Arena.
I suppose McClendon could have been affected by his team's disheartening loss on top of the indictment and the pressure in oil prices which affected his mental state. Still, the name of the Thunder's home venue remains the Chesapeake Energy Arena, and with the current push of oil prices to test the $50/bbl level, it seems oil money never went away in funding the team's success.

Without fracking, there would likely have been no Oklahoma Thunder.

Bye-Bye Berlusconi? Chinese Interest in AC Milan

♠ Posted by Emmanuel in ,, at 5/22/2016 01:37:00 PM
AC Milan in its mid-1990s heyday. It's very far from there now.
Italian club AC Milan is, in a way, emblematic of wider fortunes of its home nation. For such a long time a giant of European and hence world football, it has since fallen on hard times. I recall visiting Italy in 1994 and seeing joyful celebrations as it won not only the Serie A title but also the European Cup (today's Champions League). Its owner was of course the media magnate Silvio Berlusconi, still unaffected by the later scandals that would tarnish his image and very much the industrialist of the age. How it was back in the day!

Nowadays, things are rather different. Berlusconi has made him a laughingstock in bunga-bunga land. AC Milan struggles to compete in the second-tier continental competition, the Europa League, let alone the Champions League which it used to be a dominant participant of. The weekend's loss in the Coppa Italia to Juventus, which has won the Italian league for five straight years now, means the seventh-placed AC Milan will not qualify for the Europa League. It will be three years that they have not qualified for European competition. Prior to the game, Berlusconi even threatened not to pay his players' wages if they lost:
We cannot afford to carry on making fools of ourselves. These people here [turning to point at the camera] are the ones who give us a living because they give us money as sponsors.

They have just told me now that if you keep playing the way you are, they aren't going to give us any more money. So I won't pay you. In fact, if you want your money you would have to take me to court for it, and do you know how long it takes for a civil action case to be heard in Italy? Eight years.
While I trust former Prime Minister Berlusconi on the parlous state of Italy's judicial system--not that it reflects well on him--he remains a businessperson at heart no matter what else he has become. With an asset rapidly losing its luster, a lack of money probably accounts for their inability to build a new stadium, it's perhaps time to cut losses and move on. As it so happens, the Chinese are looking into buying this still-storied name:
Former Italian prime minister Silvio Berlusconi's family company is likely to open exclusive talks next week with a group of Chinese investors interested in buying AC Milan soccer club, one of his most cherished assets, a source said on Saturday. The tycoon is under pressure to finally relax his grip on the club he calls "my Milan", which has failed to win any major silverware in the past five years and is now in the red.

However, the club remains one of the most famous names in world soccer, having being crowned champions of Europe seven times and winning 18 Italian titles. "It's very likely that an agreement will be reached next week that will lead to a deal in the next month," a source familiar with the situation said on Saturday. The agreement would be between the consortium, and Berlusconi's family holding company, Fininvest. The makeup of the Chinese group is not clear.
The club still commands a fair sum...for now:
The consortium has valued the club at 700 million euros ($798 million), including debt, another source said last week. The club had 188.5 million euros in debt at end-2015 and made a net loss of 89.3 million euros. A deal to sell all of AC Milan is still far from certain. Berlusconi, 79, has proven very reluctant to relinquish control of the club, though he has said he cannot give it the kind of additional capital that wealthy Arab and Asian investors have been pumping into AC Milan's European rivals. 
Shadowy unnamed Chinese, an Italian mogul admitting he cannot generate Middle Eastern or Asian levels of footballing cash...it's a sign of the times as the world turns. Fascinating globalization-themed stuff, no?

High-Speed Rail: Venezuela's "Red Elephant" Project

♠ Posted by Emmanuel in ,, at 5/20/2016 08:19:00 PM
Paraphrasing Enya: Rail away, rail away, rail away.
They say that you may lend a country so much that you eventually end up owning it if it cannot pay, and this belief has interesting implications for modern-day Venezuela. It is estimated--no one knows for certain what the true amount is--that China has lent the Chavista-era socialist government $50B [!] in cash-for-oil deals. It supposedly signed up to yet another such deal recently, possibly staving of Venezuela's inevitable default under current leadership.

That said, the Chinese are not totally suckers in every respect. Sure, they may eventually "own" Venezuela with among the world's largest oil reserves--handy for when oil prices rise again in the future. But, for a "red elephant" project--a high-speed rail link in the country's even less-developed interior--the Chinese have already stopped work. Instead of being a "white elephant" project--a government vanity project which gobbles up public funding for not much public benefit, if at all--what we have here is a "red elephant" project: a communistic endeavor which ends up being of use to precisely no one:
As with many unfinished politically motivated projects dotting Venezuela — government critics call them "red elephants" — the decaying infrastructure contrasts with the railway's promising beginnings. A decade ago then-President Hugo Chavez dreamed up the Tinaco-Anaco railway as a way to populate the plains and attract development from long-dominant coastal areas.

Stretching 300 miles (468-kilometers), it was intended to move 5 million passengers and 9.8 million metric tons of cargo a year at speeds up to 135 miles (220 kilometers) per hour. Chavez turned to China, one of his closest ideological allies, for engineering and financing for the project, part of a $7.5 billion deal that has made Venezuela the world's top recipient of Chinese loans. A consortium of state-run companies led by China Railway Group Ltd, the world's largest train maker, was tasked with carrying out construction. 
At this rate, it's likely that nothing will become of it, to no one's real surprise:
But completion is four years overdue, and work, when it happens at all, has slowed to a crawl. At one barracks facility visited by The Associated Press, half a dozen workers huddled under the shade of a giant cement mixer, while two shirtless managers lounged at a control panel smoking cigarettes. Nowhere are the project's declining fortunes more visible than in Zaraza, a sweltering crossroads town of 75,000 where what used to be an arena-sized factory churning out concrete railroad ties was located.

In government news reels from 2013, the complex can be seen towering over manicured lawns and outdoor basketball courts where Chinese and Venezuelan workers socialized. Shortly after the last Chinese managers left in January 2015, a mob of local residents — some of them armed — ransacked the site and hauled away everything of value. First to go were power generators, computers and air conditioners on the back of pick-up trucks. Vandals then tore apart dozens of buildings to scavenge for metal siding, copper wiring and ceramic tiles, some of which are now on sale at roadside stalls. 
While the Chinese are not exactly shy about spreading state largesse to win friends and influence people, what could have led them to believe this project could ever amount to anything but a total waste of time and money?

Ah well, maybe it helped secure their chance to "own" Venezuela in the near future. In which case, it was just a rather costly bribe of sorts.

The End: Thailand Dumps Yingluck-Era Rice Hoard

♠ Posted by Emmanuel in , at 5/15/2016 06:49:00 PM
Getting rid of Thailand's massive Yingluck-era rice stockpiles.
Although political polarization has been a constant feature of Thai politics, the Shinawatra clan--big brother Thaksin and little sister Yingluck--have used above-market government purchases of rice as a way to gain support from rural voters. Unsurprisingly, spending public monies on a surefire money loser--nobody is expecting rice prices to rise anytime soon as other major rice-exporting countries like Vietnam and India ramped up production--has been a rallying cry for the royalists opposed to Shinawatra rule. Agricultural populism has its costs, they say.

So here we find ourselves a couple of years after the military junta overthrew Yingluck. Instead of letting the government's Yingluck-era hoard spoil, they are now going to unleash more of it much faster on an already-saturated market. This forthcoming action is causing concern in Vietnam:
Thailand's plan to accelerate sales of 11.4 million tonnes of rice in stockpiles within two months sparked concerns that it would hurt prices as well as Viet Nam's rice exports. However, some people were optimistic that the impact would not be significant. Thailand planned to sell the amount of rice in a government stockpile in May and June to generate US$2.8 billion, at an average price of US$245 per tonne, in what could be the biggest rice sale clearance ever of the world’s second largest rice exporter after India.
Actually, the expected fallout from Thailand's impending sale are not expected to be all that great on the world rice market. For one thing, most rice contracts have already been secured well in advance:
According to Le Van Banh, director of the Department of Agro-Fisheries Processing and Salt Production, the biggest stockpiled rice sell-off from Thailand would certainly have an impact on the global rice market following the law on supply and demand, as well as on Viet Nam’s rice market. However, the impact on Viet Nam’s rice exports would not be significant, at least in the short term, Banh said.

Banh also said that Thailand’s plan to sell 11.4 million tonnes of rice within just two months was not feasible. He said that Thailand exported on an average 400,000 tonnes to 500,000 tonnes of rice per month. "To sell 11.4 million tonnes in just two months sounds unrealistic," Banh said as quoted by vietnamplus.vn. The Viet Nam Food Association said that the impact on rice exports would not be huge in the second and third quarters as most contracts had been signed in the last quarter of 2015, and there were estimated to be 1.4 million tonnes of rice remaining to be shipped abroad following existing signed contracts.
Aside from the sheer difficulty of selling rice in such huge quantities immediately, also consider that these incentives were attractive to farmers for a reason: it made selling lower-quality rice at higher prices feasible:
According to Banh, the stockpiled rice for this clearance would mainly be "sub-standard" quality that the government had purchased following the 2012-2013 rice mortgage programme and Thailand would target the not too demanding markets such as in Africa. Since May 2014, Thailand has auctioned off 5.05 million tonnes of rice worth $1.5 billion.

The Thai government had previously said it aimed to clear the stockpile by the end of 2017. Meanwhile, major import markets of Vietnamese rice were China, the Philippines and Indonesia which had standards for rice quality and preferred newly-harvested Vietnamese rice, he said. "Rice exports from Viet Nam would not be significantly affected by Thailand’s sell-off in the coming months," he said. 
Shianwatras and their allies are popular and persistent. They get thrown out of office by coups and other machinations, but not by the Thai electorate. I hardly think this ends the story of "rice-pledging" as a political ploy to gain agricultural votes since the royalists have demonstrated they cannot win an election against the Shinawatras in a straight-up contest. If and when another Shinawatra or their followers gain office, don't be surprised to see this rice giveaway implemented again.

Some things never change. 

Bolivar Showdown: Venzuelan Gov't vs Dolar Today

♠ Posted by Emmanuel in at 5/13/2016 04:16:00 PM
The mighty dolartoday.com says it's now over a thousand bolivars to the buck.

Those following goings-on in Venezuela's slow-motion descent into financial oblivion should be familiar with the website dolartoday.com. While the "official" rates posted by the Venezuelan government are regarded with deep suspicion as to their veracity--all four (or is that 40?) of them--dolartoday.com has become the more believable source on what the true exchange rate is at which real Venezuelans can change bolivars can change dollars into. The parallel market does not lie, does it?

Aside from the prevailing exchange rate, I also like the illustration of money supply growth (M2), the country's nearly non-existent reserves, and spiraling foreign debt.

As it turns out, the Venezuelan authorities have been trying to put dolartoday.com--a US-based site--out of business for quite a while now. In true hyperventilating loonie left ranting-and -raving style, the site's proprietors are accused of insurrection and generally being Satan's emissaries on Earth:
DolarToday — the Venezuelan website that Caracas has been trying to sue into silence — has survived the latest legal assault. The U.S. District Court of Delaware this week dismissed “with prejudice” an amended suit by the Central Bank of Venezuela, which alleged that DolarToday was undermining the economy and helping fuel Venezuela’s record-breaking inflation...

DolarToday, which is registered in Delaware and run by three Venezuelan exiles, publishes the bolivar-dollar exchange rate that’s being offered in the Colombian border town of CĂșcuta, Colombia. But Venezuela claims the site is undermining the currency with fake rates. In its lawsuit, it called DolarToday an “illegal conspiracy to manipulate the value of Venezuela’s currency by widely publicizing false and misleading information about it.” It has also referred to the site as an act of “cyber-terrorism.”

Adam Fox — with Squire Patton Boggs, which represents the Central Bank — said the institution is still “reviewing its options” with respect to an appeal. “While we respect the court, we also vigorously disagree with its assessment of its own power to consider the controversy, which continues to impact the lives of millions of Venezuelans as well as the Central Bank,” he said in a statement. 
The thing is, if dolartoday.com were misrepresenting the true exchange rate at which everyday Venezuelans can avail USD at, wouldn't folks be selling instead of buying dollars to make a profit out of this website's misrepresentation?

I believe it's a fairly straightforward thing to understand what's going on here: Like pretty much all lse that's happening in Venezuela, the government is attempting to blame its economic collapse on foreign devils for almost entirely self-inflicted troubles. dolartoday.com is merely holding up a mirror to what's happening there, and it so happens the Venezuelan government cannot stand the sight of its own economic handiwork.

Shooting the messenger will hardly fix things.

$1B Tech IPO: Welcome to the ($5) Hostel Japonia

♠ Posted by Emmanuel in at 5/07/2016 08:46:00 PM
Watch out eBay, Japan's Mercari is out to beat you.
What's the first $1 billion startup in Japan? Judging by its national history, you'd say it's some sort of manufacturing firm, but you would be wrong. At a time when globally notable or competitive startups from Japan are quite rare, what you have instead is an e-commerce pioneer from a country largely unrecognized for minting such individuals. Enter Shintaro Yamada of Mercari, who got the idea for his service while finding $5 hostels around the world:
The trip left him determined to start a company that would let people in different countries connect with each other. He saw that even the poorest villages had mobile phones and everyone craved technology for reaching the wider world. That led him to found Mercari Inc., a mobile e-commerce site that matches individual buyers and sellers and this month became the first Japanese startup worth at least $1 billion.
Though the valuation is an accomplishment for Mercari, it also highlights the dearth of major private startups in the world’s third-largest economy. There are 155 so-called unicorns in the world, according to CB Insights, with 92 in the U.S., 25 in China and seven in India. Japan has suffered from a lack of venture capital and a risk-averse culture where the best and brightest strive for stable jobs at big companies and then stay for life.

Yamada thinks the problem isn’t quite as dire as it may appear. Many tech companies in Japan go public well before they reach the $1 billion valuation mark because the country has lenient listing requirements for small, high-growth businesses. The TSE Mothers market requires just $10 million in capitalization and has no income prerequisite; companies going public on the tech-heavy Nasdaq must clear $50 million market cap or $750,000 in profit.
To make a long story short, Mercari is a mobile marketplace app. While eBay and others also have apps of their own, the difference with Mercari is that its native interface is an app. Add this to understanding Japanese consumer habits better and you have a competitive advantage:
Mercari’s edge has been that it’s designed specifically for mobile phones and lets individuals easily browse through items for sale or post their own. People sell everything from clothes and electronics to baseball tickets. While its staying power remains unproven, the app has been downloaded 32 million times and generates 10 billion yen in monthly transactions, Yamada said. Mercari takes a cut of each sale.

“The market for business-to-consumer services is already quite developed, but user-to-user applications still have a lot of room to grow,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “Mercari is already in the lead in Japan. There are significant benefits for early movers.”
Users of Mercari laud its simpler user interface and not having to compete with big retailing operations in comparison to eBay. As the saying goes, competition improves the (e-tailing) breed.

Today's PRC Pt III: Building a Creative Economy

♠ Posted by Emmanuel in , at 5/03/2016 06:49:00 PM
Yes, Kung Fu Panda 3 qualifies as a PRC production.
The current Chinese leadership's plans to make a transition from a manufacturing- and export-oriented economy to a services- and domestic-oriented one are well-known by now. Encouragingly, the so-called "creative economy" may be coming online just when the old-style economy appears to be faltering. So the creative economy's scale is nowhere near that of manufacture-for-export yet, but China does have to start from somewhere:
The new engines of China’s economy are humming as social media, movie theaters, karaoke bars and art galleries shrug off the nation’s slowdown, according to a new report from the nation’s statistics authority.

First-quarter revenue from cultural industry companies rose 8.6 percent in the from a year earlier to 1.67 trillion yuan ($258 billion), the National Bureau of Statistics said Friday. The report based on surveys of 47,000 companies is the first such quarterly tally and comes as the agency strives to improve coverage of the "new economy."

Revenue from "cultural information transmission services," which include Internet companies and some satellite and telecommunication providers, surged 27.8 percent from the first quarter of 2015. Firms in "cultural, leisure and entertainment services" including travel agencies, parks and karaoke bars, saw sales jump 25 percent.
In some ways, the contributions from marketing culture are still understated in China. Remember, China ranks fourth worldwide in the number of tourists it attracts. It is also mentioned in the article above that the Kung Fu Panda 3 movie became the highest-grossing film in China recently. This outcome is likely due to the extensive partnership its producer had with PRC-based firms:
The record is an important milestone for [Jeffrey] Katzenberg and DreamWorks Animation. Kung Fu Panda 3 is the first film from the studio's burgeoning Shanghai-based venture, Oriental DreamWorks, which was established in 2012 in partnership with two state-backed Chinese companies with a combined investment of $350 million in cash and intellectual capital.
If it helps with China's transition, then I don't see any harm in it.

Today's PRC Pt II: Letting SOEs Fail

♠ Posted by Emmanuel in , at 4/30/2016 08:45:00 PM
No longer a novelty: a Chinese SOE that goes belly up.
Warren Buffett had a memorable turn of phrase when he said that we can identify who's naked when the tide rolls out. With the recent slowdown of China, we are seeing a similar phenomenon. Many--myself included--believed that the PRC would extend unconditional help to distressed state-owned enterprises (SOEs) when push came to shove. As any number of these SOEs are coming under distress, we are finding that there is no "blanket" coverage for these firms as quite a few have been left waiting for a state rescue that may never come:
China’s state-backed companies no longer have the ironclad support of the government -- and that’s bad news for the equity bull market in Hong Kong, says UBS Group AG.

Three of the seven Chinese companies that defaulted on debt repayments this year are partly owned by the state, including Baoding Tianwei Group Co. [also see here] The end of implicit government support will drive up funding costs and undermine foreign investor confidence in the 20 percent rebound by the Hang Seng China Enterprises Index, said Lu Wenjie, a Shanghai-based equity strategist at UBS.

"People are realizing national SOEs can default, local government-owned enterprises can default -- anything can default," Lu said. "H-share investors, especially foreign investors [Hong Kong-listed shares of stock of PRC-headquartered firms], haven’t paid much attention to this yet, so the risk isn’t priced in."
Is it the end of implicit guarantees? If so, the risk factor may not be adequately "priced in" as of yet:
Defaults are a relatively new phenomenon in China, which had its first such case only in 2014. The rising number of payment failures is reverberating across the nation’s $3 trillion credit market, with onshore junk debt heading for its biggest monthly selloff since 2014, issuers canceling bond sales and Standard & Poor’s cutting its assessment of Chinese firms at the fastest pace since 2003.

The widening of credit spreads from eight-year lows also threatens an incipient economic recovery, which has been mainly supported by a surge in cheap lending.
It's the [Western] notion of "moral hazard" being realized: Instead of the PRC bailing out nationally-owned firms in the event of trouble, it appear as though it's becoming more selective. What remains to be seen, though, is what happens if and when the really large Chinese firms run into trouble which have systemic importance like, say, its four big banks. I believe the "too big to fail" phenomenon will be observed since the recent bankruptcies were all of (relatively) smaller firms.

Today's PRC Pt I: Michael Jordan Takes On "Qiaodan"

♠ Posted by Emmanuel in , at 4/26/2016 03:36:00 PM
Just sue it: Michael Jordan takes on the fakers "Qiaodan"
."The image of China as the Wild, Wild East of intellectual property protection is, in many instances, well-deserved. After all, if you allow copying entire Apple Stores or Land Rover automobiles, then IP protection is probably not one of your priorities. But, that may become a thing of the past as the American basketball legend Michael Jordan has reached China's Supreme People's Court in a case against PRC-based "Qiaodan." Despite the knock-off being around since, oh, 1984, let's just say that it took this long to get around to meaningful legal action:
In the appeal hearing that started on Tuesday, Jordan’s lawyers argued that Qiaodan Sports Co. Ltd., a family-owned business with about 6,000 shops selling shoes and sportswear throughout China, has damaged the basketball star’s legal rights to his name, asking that the company’s trademark registrations be revoked. Qiaodan, pronounced "Chee-ow dahn", is a Mandarin transliteration of Jordan that was registered by the Chinese company more than a decade ago. Jordan first sued the company in 2012 and lower courts have ruled on behalf of the Chinese company.
It appears a flagrant violation, yet the wheels of Chinese justice take a while to turn:
Qiaodan, one of the country’s top sports apparel makers founded in 1984, legally registered the Pinyin "Qiaodan" and Chinese characters of the name. Jordan’s lawyers say the company uses his basketball jersey number "23" to sell products, as well as created a similar basketball replica of Jordan’s iconic "Jumpman" logo that Nike Inc. uses for its Air Jordan brand. Jordan’s team argues that under China’s law, the company’s trademarks have damaged his legal rights and is asking the court to invalidate more than 60 trademarks used by the company.

"Qiaodan is a name that is well known to every household in China and refers to Michael Jordan," Qi Fang, a lawyer with Fangda Partners representing Jordan, told the court on Tuesday. Lawyers for the Chinese company succeeded last July in arguing that Jordan is a very common English last name. Jordan’s lawyers appealed that case and the decision by the Supreme People’s Court will be final.
With China aiming to become a consumer-driven market, the outcome of this trial matters insofar as it will send a signal to other foreign brands whether their IP will be protected better:
The case illustrates the challenges of Chinese intellectual property law for some foreign companies in the world’s fastest-growing consumer market. The case could set an important legal precedent for trademark rights in China, and some legal scholars say the case offers the nation’s Supreme People’s Court an opportunity to present a positive image of the Chinese legal system.

"It’s an extremely influential case, and the final verdict from China’s top court would play a leading role in future similar cases," said Li Shunde, a Chinese Academy of Social Sciences research specialist in intellectual-property law. "China has been consolidating IP over the past years and apparently the authorities want to use this case to show that the country takes the IP issues very seriously and is devoting resources to protect the rights of foreign businesses."

Volkswagen's State Capture of Germany

♠ Posted by Emmanuel in , at 4/24/2016 07:59:00 PM
Chancellor Merkel and ex-VW honcho Martin Winterkorn in happier times.
The Financial Times has a very interesting article on the extent of German automakers' influence on the German state. You would think that the Germans of all people are not as prone to the pitfalls of excessively close state-firm ties, but the Volkswagen emissions scandal raised all sorts of pointed questions about the matter. Just recently, the giant automaker set aside $18 billion to cover costs associated with its emissions-cheating violations. As it turns out, Chancellor Merkel has been lobbying on behalf of Germany's automakers all these years for less stringent emissions regulations throughout the world:
The ties between Ms Merkel’s government and big carmakers have come under increasing scrutiny since September, when US regulators revealed that Volkswagen’s diesel vehicles were fitted with special software enabling them to cheat in emissions tests. The scandal, the worst in VW’s history, has tarnished Germany’s reputation for quality in manufacturing and left many wondering whether the German authorities’ closeness to VW, Mercedes-Benz and BMW blinded them to the potential for wrongdoing in the industry.

“When you know that you have a very large part of the political class in your pocket — and that was clearly the case with VW — then you feel safe,” says Philippe Lamberts, the Belgian co-chair of the Green group in the European Parliament. “That inevitably leads to complacency; that whatever you do, you have the German government fully lined up behind you.”
It has happened too at the EU level:
The closeness between Germany’s car industry and its government has been reflected in a number of ways since Ms Merkel became chancellor in 2005.

Officials intervened in Brussels to water down curbs on pollutants, abandoned stringent independent tests of car emissions and ignored repeated warnings from research groups about suspicious readings from tests on diesel cars. Now Ms Merkel’s government stands accused of wrapping its own inquiry into the VW scandal in a shroud of secrecy, which even seasoned MPs are finding hard to penetrate. 
To grasp her actions, consider the importance of the activity for Germany:
Yet Ms Merkel’s lobbying efforts are in many ways understandable. Carmaking is Germany’s largest industry, employing 792,500 people and recording turnover of €404bn in 2015 — a fifth of the country’s industrial revenue. The jobs of one in 20 Germans depend on the motor sector.

Ms Merkel has suggested that the carmakers are synonymous with Germany. Addressing VW employees in 2008, she called the company a “great piece of Germany”, and a “symbol of [our] development from the second world war until today”. VW’s history exemplified the reconstruction of the postwar years. “The German government stands by VW,” she said.
It's too bad that "state capture" is now part of Germany's industrial lexicon as well. You would never have expected it of the Germans, no?