The Volkswagen subsidiary MAN Energy Solutions intends to discontinue the construction and development of gas turbines after the German government vetoed the sale of the division to China.

"We respect the decision of the German government," explained a spokesperson for the Augsburg-based company on Wednesday. MAN Energy will wind up the development of new gas turbines in the coming months. However, profitable maintenance is to be retained. The MAN Energy division has a total of 100 employees in Oberhausen and Zurich. The Federal Cabinet had prohibited the planned sale to the Chinese CSIC Longjiang GH Gas Turbine Co (GHGT) with reference to the Foreign Trade and Payments Act. It fears that China could use the gas turbines not for civilian purposes, but also to power warships.

GHGT is part of the shipyard group China State Shipbuilding Corp (CSSC), which also builds ships for the Chinese navy. China wants to modernize its fleet - the largest in the world. According to the Foreign Trade and Payments Act, the German government can prohibit sales to non-EU countries if they could endanger national security. Economics Minister Robert Habeck (Greens), whose house had proposed the ban, defended the decision: investments in Germany are generally welcome and the economy thrives on trade. However, technology that is important for public order must be protected. That is why the transaction was prohibited. "And that is the right thing to do." In Berlin, Interior Minister Nancy Faeser (SPD) cited "security policy reasons".

MAN Energy's gas turbines are used for power generation or to drive pipelines. Volkswagen had tried to dispel the concerns of the German government. According to insiders, the Group had submitted expert reports that were intended to refute the usability of MAN gas turbines or the underlying technology as a propulsion system for warships. In principle, these would be significantly more efficient than the diesel engines commonly used. MAN Energy has been supplying gas turbines to China for civilian purposes for a long time.

MAN Energy Solutions, with its 14,000 employees, originally belonged to MAN, but was transferred directly to Volkswagen in the course of the merger of Scania and MAN to form the truck holding company Traton and is to remain part of the Wolfsburg-based group until at least 2026. Among other things, the company produces large diesel and gas engines for ships and power plants, which are used to generate electricity and district heating, for example.

(Report by Andreas Rinke, Christian Krämer and Alexander Hübner, edited by Ralf Banser. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).