Stoiber had ambitions to run again for the chancellorship, but Merkel secured the nomination, and in November 2005 she won the general election. He was slated to join Merkel's first grand coalition cabinet as Economics minister. However, on 1 November 2005, he announced his decision to stay in Bavaria, due to personnel changes on the SPD side of the coalition (Franz Müntefering resigned as SPD chairman) and an unsatisfactory apportionment of competences between himself and designated Science minister Annette Schavan. Stoiber also resigned his seat in the 16th Bundestag, being a member from 18 October to 8 November.
In 2005, Stoiber successfully lobbied Novartis, the Swiss pharmaceuticals group, to move the headquarters of its Sandoz subsidiary to Munich, making it one of Europe's highest-profile corporate relocations that year as well as a significant boost to Stoiber's attempts to build up Bavaria as a pharmaceuticals and biotechnology center.
During the run-up to the German general election in 2005, which was held ahead of schedule, Stoiber created controversy through a campaign speech held in the beginning of August 2005 in the federal state of Baden-Württemberg. He said, "I do not accept that the East [of Germany] will again decide who will be Germany's chancellor. It cannot be allowed that the frustrated determine Germany's fate." People in the new federal states of Germany (the former German Democratic Republic) were offended by Stoiber's remarks. While the CSU attempted to portray them as "misinterpreted", Stoiber created further controversy when he claimed that "if it was like Bavaria everywhere, there wouldn't be any problems. Unfortunately, not everyone in Germany is as intelligent as in Bavaria." The tone of the comments was exacerbated by a perception by some within Germany of the state of Bavaria as "arrogant".
Many, including members of the CDU, attribute Stoiber's comments and behavior as a contributing factor to the CDU's losses in the 2005 general election. He was accused by many in the CDU/CSU of offering "half-hearted" support to Angela Merkel, with some even accusing him of being reluctant to support a female candidate from the East. (This also contrasted unfavorably with Merkel's robust support for his candidacy in the 2002 election.) He has insinuated that votes were lost because of the choice of a female candidate. He came under heavy fire for these comments from press and politicians alike, especially since he himself lost almost 10% of the Bavarian vote – a dubious feat in itself as Bavarians tend to consistently vote conservatively. Nonetheless, a poll has suggested over 9% may have voted differently if the conservative candidate was a man from the West, although this does not clearly show if such a candidate would have gained or lost votes for the conservatives.