Well, considering best german automotive engineering got left behind in early nineties and that for like 20 years already owning a BMW or Mercedes means constant hassle and tons of cash for trivial repairs - yes. German auto engineering just isn't there.
VW scandal is different - it's what you get when you set unreasonable and actually conflicting requirements.
About cars: Do you mean things like the VW scandal? Or do you mean actually shoddy engineering in cars?
I think the reputation for engineering stems from darker times.