“The state’s political and business leaders boosted the self-confidence of the Saxon people and convinced them their fate was in their own hands,” says Joachim Ragnitz, managing director of the Ifo Institute for Economic Research in Dresden. “It was like nation-building, and it worked. They got people to believe that they really had to be best at whatever they were doing.”
The Saxon government threw its support behind Volkswagen AG, the first big West German company to make a major investment in the region. In 1990, the company decided to produce the VW Polo compact car in Zwickau and since then has built some 3 million cars and 8 million motors at factories in the state.
Saxony had three things going for it at the time: Volkswagen’s chief executive officer, Carl Hahn, was a Saxon native. It had carmaking experience, in spite of the Trabant. And VW got big subsidies, half from the federal government and half from the state. VW’s investment attracted parts suppliers and ultimately other automakers to the state.
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