a) No. b) It depends.

I know the German system quite well and know people who did their PhD in industry, people who did their PhD in an externally funded research project, and people who pursued a more self-directed PhD while working as a research and teaching assistant.

I don't think that there is a general 'PhD inflation' in Germany (though there are some disciplines with this problem). It is well understood by most PhD students that an academic career is the exception, not the rule. Most of them choose to do a PhD because they like the academic environment and want to learn more. Most PhDs go on to work in industry research labs, science-adjacent roles (e.g., museums) or as group leaders in tech companies. There is sufficient need for PhDs in most fields.

Industry-embedded PhD students are required to meet the same criteria as other PhD students. They also publish their research at the same conferences - but it is often more on the applied side. One could argue that such research has "little scientific value" - but so does most research.

The most important outcome of a PhD is not the list of publications but a person who deeply understands a domain, knows how to critically analyze a problem, and finds good solutions. Doing a PhD 'in industry' also allows you to do this. And it gives you a foot in the door at that company.

FWIW, many PhD students I knew, e.g. at BMW, complained a little bit about the side-projects they were expected to do, or the bureaucracy at such large companies. And, because you don't have to do any teaching and rarely supervise undergrads in industry labs, you are less qualified for an academic career than PhD students who work at the university.