The state government of lower Saxony (the state where VW is based) owns 25% of VW. I don't think that's a coincidence.
Edit: looks like it's 20%
In practice, the 'same entity' are very different people in government with different mandates.
Heck, even the german car newspapers apparently would not really attack german cars on a serious level. At lest I head of a case, where a reporter from Auto Bild was on a test drive for a shiny new car model - and some shiny new feature did not work. What they did, was not report it, but secretly worked out, how to conceal that in the reporting. (no sources avaiable, heard it from people in the industry)
The big corps can accumulate more slack that would otherwise need money from the state.
This keeps unemployment rates down, at the cost of giving out tax cuts.
It's always important to keep the powerful people happy.