The UK car industry was once one of Germany’s biggest competitors; now it has become one of its biggest assets, says author Dominic Sandbrook. How did Germany accelerate away?

Forty years ago, Germany’s biggest carmakers were putting the finishing touches to a product that would change their image forever. The Volkswagen Golf is one of the bestselling cars of all time. It made its debut in 1974, the year West Germany won the World Cup at home in Munich and the German band Kraftwerk released their ground-breaking album Autobahn. Ever since, the Golf has been shorthand for mass-market success. Last year VW sold more than 430,000 Golfs all over Europe – a staggering 125,000 ahead of its closest rival. This year they brought out a brand-new, seventh incarnation. And even if you don’t own one yourself, there’s undoubtedly one in a drive near you.

It is, of course, a very familiar story. German manufacturing is one of the great success stories of the post-war age. Little wonder, then, that 21st-Century Germany probably commands more raw economic and political clout than any time in its peacetime history. If you want to know why Angela Merkel calls the shots in Europe, Germany’s car factories are a pretty good place to start.

By contrast, Britain’s car industry is a shadow of its former self. We do still make almost one and a half million cars a year, which is good news for thousands of British engineers. But these days, we make them for other people.

The iconic Mini plant at Cowley, for example, is celebrating its centenary this year. It was founded in 1913 by the entrepreneur William Morris as the home for his legendary Morris Oxford. Today it still makes thousands of cars – but it makes them for BMW. It’s a similar story at Crewe, the home of another great British icon, Bentley – which actually belongs to Volkswagen.

Half a century ago, let alone when Morris was at his peak, this would have seemed unimaginable. But the sad truth is that Britain’s car firms only have themselves to blame. Seventy years ago, at the end of World War II, Germany was on its knees. After the fall of Hitler’s empire, its car industry lay in ruins. In August 1945 the British Army sent a major called Ivan Hirst to take control of the giant Volkswagen plant in Wolfsburg, which had been built under the Nazis to produce ‘people’s cars’ for the German masses.

Ignoring his sceptical superiors, Hirst could see the potential amid the shattered debris of the Wolfsburg factory. Rebuilding Volkswagen, he thought, would be a step towards rehabilitating Germany as a prosperous, peaceful European ally. And of course he was right. In the next few years, Hirst restarted production of a car we know today as the Beetle. And from then on, VW was flying.

By the late 1950s, with production up and employment buoyant, West Germany was enjoying an economic miracle. The memories of Nazism were banished, and the Germans began to rebrand themselves as a forward-thinking, hard-working and supremely modern industrial nation.

In the meantime, Britain was coasting in the glow of the affluent society. For decades we had been one of the world’s great car-making nations. And yet, slowly but surely, the wheels were beginning to come off. The men who ran our car firms – men like William Morris, who became chairman of the newly merged British Motor Corporation (BMC) at the age of 74 – were elderly and autocratic. Instead of embracing new technology and tapping the expanding European markets, they shrank from continental competition and preferred to sell cheap cars to Britain’s former colonies.

Even the most celebrated British car of all – the Mini, launched in 1959 – was a reflection of our industrial and imperial decline. With fuel prices rocketing after Britain’s disastrous bid to recapture the Suez Canal from Egypt in 1956, BMC’s designers had been told to produce a car that was smaller and required less petrol. And although the Mini was an enormous hit, there was a sting in the tail. BMC actually lost £30 for every car it sold.

Far from being a symbol of Sixties cool, therefore, the Mini was really a symbol of something rotten at the heart of Britain’s economy. It was a brilliantly designed metaphor for an industry crippled by complacent leadership, dreadful salesmanship and a fatal culture of self-satisfaction.

All the time, Germany’s car industry went from strength to strength. Crucially, it enjoyed excellent labour relations – a stark contrast with the pitched battles in many of Britain’s troubled car plants.

Europe’s favourite brands

In Germany, management and unions worked closely together in the interests of the common good. Indeed, by law all major German firms are required to set up Works Councils, where the bosses and the unions must work together ‘in a spirit of mutual trust’.

In Britain, by contrast, car factories in the 1960s and 1970s became daily battlegrounds, where militant shop stewards and complacent managers fought out an overt class war. One fact probably says it all about the difference between Britain and Germany in the post-war years. In 1978, for every day that German manufacturers lost to industrial action, we lost ten.

By the time Margaret Thatcher came to power a year later, the game was probably up for Britain’s car industry. Drivers were already switching to foreign motors – not least German models such as Mercedes, Porsche, Audi and, above all, BMW, which mastered the art of high-end branding.

In 1994 BMW bought the last remnant of British mass car production, the Rover Group. A year later, in the film Goldeneye, Pierce Brosnan’s James Bond was even equipped with a BMW Z3, supposedly fitted with Stinger missiles. By now, cars had become the ultimate metaphor for Germany’s extraordinary industrial revival – and for the collapse of much of Britain’s manufacturing industry.

Today the results are all around us. Thanks in large part to the success of its manufacturers, Angela Merkel’s Germany is the biggest economy in Europe and the fourth biggest in the world, as well as the world’s second largest exporter.

It is little wonder, then, that while Britain ran a whopping £120bn budget deficit in 2012-13, the Germans managed to run a small surplus – as they have done so often in recent years. And it is little wonder, either, that amid the terrible turmoil in the capitals of the eurozone, the Germans have ended up calling the shots.

From Britain’s perspective, the tragedy is that we always had the skills. But we lacked the right management, the right unions, the right priorities, and, quite frankly, the right work ethic. And in the end, we paid a heavy price.

There is, of course, a bright side. We do still make more than a million cars a year, providing jobs for thousands of British workers. Even during the eurozone crisis, British car production has continued to grow, while German production actually fell last year. But there’s no escaping the fact that the Germans still make more than four times as many cars as we do. And what happens to the profits from all those Minis and Bentleys of which we’re so proud? They end up in Wolfsburg and Munich.

Once our car industry was one of the Germans’ chief competitors. Now, it has becomes one of their biggest assets.

Half a century ago, they were on their knees. Yet through grit and dedication, they worked their way back. And now, from their car showrooms to their national finances, the Germans are the envy of the world. To be honest, I rather admire them for it.

Dominic Sandbrook is the author of several history books about Britain in the 1960s and 1970s, including White Heat, State Of Emergency and most recently, Seasons In The Sun