Napoleonic France abolishes the Holy Roman Empire and Prussia later emerges as the most powerful German state. Prussia excludes the Habsburg lands as it forms a confederation of German states, which later unites into a single country. Later, the Habsburg state is on the losing side of a major European war, and rump Austria is formed as a second major German state. While the larger kleindeustchland to the north may later attempt to annex it, the other major powers intervene and forbid them from coming together. Eventually Austria gets so used to its own independence its ceases to think of itself as part of Germany at all.
That's a good TL, let's finesse it a little.
First, after Napoleonic France abolishes the HRE you've got a first attempt to unite Germany by liberal-nationalists. This attempt fails because they get into too much fighting each other, not enough fighting their mutual opponents. This leaves no less than three rival versions of "Germany" floating around.
Second, there needs to be a way to limit Habsburg power before that general European war. Perhaps Prussia and Austria fight and Prussia wins by using railroads to send more troops than the Austria that outnumbers them? Austria kicks the crap out of Italy as a salve to Austrian ego, even, to avoid this looking like a Prussia-wank.
Next, have the Prussians (I assume we'll find a chancellor who's got the requisite Junker background and ultra-conservative mentality) outmaneuver France into a war circa 1870 that is a relatively quick win and lets them forge a unified Kleindeutsch state at French and Austrian expense. This small-Germany gets really, really economically and militarily powerful and Russia and France decide on an alliance (yes, yes, I know, that's ASB, no way would the reactionary Tsars ever ally with any France).
So then these guys join up with Britain, and decide to fight the Germans and Austro-Hungarians (because I can't see an 1866 loss ending well for just plain Austria). After much chaos the Habsburgs and Germans, who ally with....oh, Hell, just for randomness's sake Bulgaria and the Ottoman Empire wind up defeating Russia only to lose their own war, leaving a rump-Austria and a partitioned Germany, the Allies being dumb enough to use ethnic self-determination as the means to do this.
20 years later some random former bum takes over Germany at the head of a popular militaristic political party and briefly *does* establish Grossdeutschland by using political and military savvy. Then, with Russia ruled by another random guy selected out of a book who I have no real idea what his name is- Juga-something, Jugurtha, maybe?-he decides to invade Russia and where that guy is worse than the Tsar he's worse than that guy and Russia wins and leaves Germany split into Austria, Luxemburg, East Germany, and West Germany.
Albeit this is a poorly done timeline with no real thought into it, and I'm sure plenty of people would object to the details here, particularly random leaders in Germany and Russia and the idiot ball affecting the democracies. Oh, and for LULZ, I figure that the bum that takes over Germany should have a vaguely Czech-like name so as to have him be the check on Germany and have the Russian use the name Man of Steel because that leaves room for lots of cheap jokes in the ATL. I mean "Stalin" is almost perfect from the jokey-post-titles viewpoint.
